Property Valuation
In Texas, the relationship between cap rates and property values is:
ADirect — higher cap rates mean higher values
BInverse — higher cap rates indicate lower values; lower cap rates indicate higher values✓ Correct
CUnrelated — cap rates have no effect on value
DDetermined solely by property tax rates
Explanation
Cap rates and values are inversely related: Value = NOI ÷ Cap Rate. A lower cap rate (reflecting higher demand, lower risk) results in a higher value for the same NOI. Rising cap rates compress values; falling cap rates expand values.
Related Texas Property Valuation Questions
- The most reliable indicator of market value for a Texas residential property is:
- Texas real estate appraisers are licensed by:
- The principle of substitution states that:
- A Texas appraiser determines a capitalization rate using market extraction. This process involves:
- An appraiser in Houston performing an appraisal on a property located in a rapidly gentrifying neighborhood should give the most weight to:
- Accrued depreciation in the cost approach refers to:
- The 'Band of Investment' method in Texas appraisal is used to:
- Texas Property Tax Code requires that property be valued at market value. 'Market value' is defined as the price a property would bring if:
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