Tennessee Property Valuation
Practice Questions & Answers (2026)
Property valuation questions on the Tennessee exam test the three approaches to value (sales comparison, cost, and income), how appraisals work, and what affects market value. The Tennessee Real Estate Commission (TREC) tests when each approach is most appropriate, how adjustments are made in the sales comparison approach, and what factors an appraiser considers vs. ignores. Tennessee candidates often struggle with income approach calculations — particularly gross rent multiplier (GRM) and net operating income (NOI) — and with the cost approach depreciation calculations. These are high-difficulty math and concept questions where careful study of the explanations pays off significantly on exam day.
Tennessee Exam Study Resources
Everything you need to pass — in one place.
Tennessee Property Valuation — Practice Questions & Answers
122 questions on Property Valuation from the Tennessee real estate question bank. First 10 are free — sign up to unlock all 122.
Q1. The income approach to value is most appropriate for:
Explanation
The income approach is most appropriate for income-producing properties such as apartment complexes, office buildings, and commercial properties. It estimates value based on the property's ability to generate income.
Q2. Comparative Market Analysis (CMA) is typically prepared by a:
Explanation
A CMA is prepared by a real estate licensee (not a licensed appraiser) to help clients understand the market value of a property. It uses recent comparable sales to estimate a likely selling price but is not an appraisal.
Q3. Economic obsolescence (external obsolescence) is a loss in value caused by:
Explanation
Economic (external) obsolescence results from factors outside the property's boundaries, such as environmental nuisances, nearby commercial development, or economic decline in the area. It is generally considered incurable because the owner cannot control external factors.
Q4. When using the gross rent multiplier (GRM), if a property rents for $1,500/month and comparable properties sell at a GRM of 120, what is the estimated value?
Explanation
Value = Monthly Rent × GRM = $1,500 × 120 = $180,000. The GRM is a quick method to estimate value by multiplying monthly gross rent by a market-derived multiplier.
Q5. The principle of substitution states that:
Explanation
The principle of substitution is foundational to all three appraisal approaches. It holds that a rational buyer will pay no more for a property than the cost to acquire a comparable substitute on the open market.
Q6. In the sales comparison approach, an appraiser makes a negative adjustment to a comparable sale when:
Explanation
When a comparable is superior to the subject in a particular feature, the appraiser subtracts (makes a negative adjustment) from the comparable's sale price. The logic: if the comp is better than the subject, the comp's price must be reduced to reflect the subject's lesser value.
Q7. Capitalization rate (cap rate) is calculated as:
Explanation
Cap Rate = Net Operating Income (NOI) ÷ Property Value. It expresses the relationship between a property's income and its value, allowing investors to compare investment properties. A higher cap rate generally indicates higher risk and/or lower price.
Q8. Functional obsolescence in a property refers to:
Explanation
Functional obsolescence is a loss in value due to features that are outdated, poorly designed, or no longer acceptable to buyers — such as an outmoded kitchen layout, inadequate electrical service, or only one bathroom in a large home.
Q9. Assessed value for property tax purposes in Tennessee is typically a percentage of:
Explanation
In Tennessee, assessed value is calculated as a percentage of the property's appraised (market) value, as determined by the county assessor. For residential properties, the assessment ratio is 25% of appraised value.
Q10. The cost approach to value is most reliable for:
Explanation
The cost approach is most useful for special-purpose properties (schools, churches, government buildings) where market sales data is limited. It estimates value as the cost to reproduce or replace the improvements, less depreciation, plus land value.
Q11. The market value of a property assumes:
112 more Property Valuation questions
Create a free account to unlock all 122 Tennessee Property Valuation questions with full explanations.
Free account · No credit card · Instant access to 25 questions
Ready to take the full exam? Start free.
25 free questions · No signup · Instant access to all Tennessee topics