Rhode Island Property Valuation
Practice Questions & Answers (2026)

Explanation

The gross rent multiplier (GRM) = Sale Price ÷ Monthly (or Annual) Gross Rent. It is a quick tool for estimating the value of small income properties. A property that rents for $2,000/month with a GRM of 150 would be worth approximately $300,000 ($2,000 × 150).

Explanation

The principle of progression holds that a lower-value property may increase in value when surrounded by higher-value properties. This is the opposite of the principle of regression, where a high-value property loses value when surrounded by lower-value properties.

Explanation

Curable physical deterioration includes deferred maintenance items (like peeling paint, broken gutters, or worn carpeting) where the cost to repair is less than the resulting increase in value. These items are economically worthwhile to repair.

Explanation

If the market has appreciated 1% per month over 8 months, the comparable's price must be adjusted upward by 8% to reflect current market conditions. Time adjustments bring past sale prices to present value.

Explanation

The income approach (capitalizing net operating income) is most appropriate for income-producing properties such as apartment buildings, commercial properties, and investment real estate, where value is driven by the income stream the property generates.

Explanation

When a comparable is inferior to the subject (e.g., lacks a garage the subject has), the appraiser adds value to the comparable's sale price (positive adjustment) to account for the difference, bringing the comparable up to the subject's quality.

Explanation

The cost approach (land value + depreciated replacement cost of improvements) is most reliable for unique or special-use properties — such as churches, schools, or government buildings — where there are few comparable sales and no rental income to capitalize.

Explanation

Cap Rate = Net Operating Income ÷ Value (or Sale Price). It represents the rate of return on a real estate investment based on the income it generates. A $500,000 property generating $40,000 NOI has an 8% cap rate.

Explanation

External (economic) obsolescence is a loss in value due to factors outside the property — such as neighborhood decline, proximity to a new highway or industrial facility, or adverse economic conditions. It is incurable because the owner cannot control external factors.

Explanation

When a comparable is superior to the subject (e.g., has an extra bedroom), the appraiser makes a negative adjustment (subtracts value from the comparable) to bring it down to the subject's level. Adjustments always go to the comparable, not to the subject.