Fundamentals of Real Estate
Principles Exam Questions & Answers
(Grade A+)
Principle of highest & best Use -
correct answer ✅Is a key premise in a property valuation, as the
ultimate utility of a property is the foundation of its market value.
The highest & best use of any property is the use at the time of the
valuation, which will likely produce the highest & best use of any
property.
Principle of substitution: -
correct answer ✅States that the buyer will pay more more for a
property than then the cost of accruing a similar and equally
desirable property on the market. Therefore this principle is
applicable to the decision making process of all real estate buyers &
Sellers and is fundamental to all property valuations.
EX there are 3 homes for sale in a subdivision one for 380, 390 &
400 the buyer chooses to purchase the one for 380
Principle of Contribution: -
correct answer ✅States the value of a component (feature) relates
to the overall value of the property. Specifically, the value of any
property component is measured how much it adds to the homes
market value
, Fundamentals of Real Estate
Principles Exam Questions & Answers
(Grade A+)
EX: Bob wants to develop basement by adding 18,000 and he
ensures that it meets permits after a new valuation is done &
shows the developments only contributes $8000 to increase the
value.
Principle of conformity: -
correct answer ✅States that in order to maintain the maximum
value, a property must reasonably conform to the existing
standards of the area . Reasonable refers to the degree of
conformity
EX: The subject property is a single family residence on green street
has 3 story condo's building with parking for residents & visitors.
The lack of conformity among the types and uses of these
properties negatively affects the value of the single family
residences on the street.
Principle of progression: -
correct answer ✅States when the properties in the same are
dissimilar, the property with lesser value will be enhanced in value
by its close proximity to properties of greater value in the
immediate vicinity.
Principles Exam Questions & Answers
(Grade A+)
Principle of highest & best Use -
correct answer ✅Is a key premise in a property valuation, as the
ultimate utility of a property is the foundation of its market value.
The highest & best use of any property is the use at the time of the
valuation, which will likely produce the highest & best use of any
property.
Principle of substitution: -
correct answer ✅States that the buyer will pay more more for a
property than then the cost of accruing a similar and equally
desirable property on the market. Therefore this principle is
applicable to the decision making process of all real estate buyers &
Sellers and is fundamental to all property valuations.
EX there are 3 homes for sale in a subdivision one for 380, 390 &
400 the buyer chooses to purchase the one for 380
Principle of Contribution: -
correct answer ✅States the value of a component (feature) relates
to the overall value of the property. Specifically, the value of any
property component is measured how much it adds to the homes
market value
, Fundamentals of Real Estate
Principles Exam Questions & Answers
(Grade A+)
EX: Bob wants to develop basement by adding 18,000 and he
ensures that it meets permits after a new valuation is done &
shows the developments only contributes $8000 to increase the
value.
Principle of conformity: -
correct answer ✅States that in order to maintain the maximum
value, a property must reasonably conform to the existing
standards of the area . Reasonable refers to the degree of
conformity
EX: The subject property is a single family residence on green street
has 3 story condo's building with parking for residents & visitors.
The lack of conformity among the types and uses of these
properties negatively affects the value of the single family
residences on the street.
Principle of progression: -
correct answer ✅States when the properties in the same are
dissimilar, the property with lesser value will be enhanced in value
by its close proximity to properties of greater value in the
immediate vicinity.
