NSAR Salesperson Licensing Exam
UPDATED QUESTIONS AND CORRECT
ANSWERS
Subjective Value - CORRECT ANSWER the perception of value in the minds of the
buyer and seller
Objective Value - CORRECT ANSWER related to the direct cost of creating (e.g.
acquiring a lot and building a home)
Types of value found in the Canadian Economy - CORRECT ANSWER -insurable;
book
-appraised
-salvage
-assessed
-liquidation
-loan
-sentimental
Three approaches that appraisers use to establish an estimate of value - CORRECT
ANSWER -cost approach (actual cost)
-income approach (subjective value)
-direct comparison approach (subjective value)
market price - CORRECT ANSWER the price for an individual property
market value (aka value in exchange) - CORRECT ANSWER an estimate of value
arising from many sales (market prices)
,Definition of Market Value - CORRECT ANSWER The most probable price, as of a
specified date, in cash, or in terms equivalent to cash or in other precisely revealed terms, for
which the specified property rights should sell after reasonable exposure in a competitive
market under all conditions requisite to a fair-sale, with the buyer and seller each acting
prudently, knowledgeably, and for self-interest, and assuming that neither is under undue
duress.
The 4 assumptions of market value - CORRECT ANSWER 1) reasonable time
2) no undue pressure
3) prudent behaviour
4) informed buyer and seller
15 Principles of Value - CORRECT ANSWER - Principle of Anticipation
- Principle of Balance
- Principle of Change
- Principle of Competition
- Principle of Conformity
- Principle of Consistent Use
- Principle of Contribution
- Principle of External Factors
- Principle of Highest & Best Use
- Principle of Increasing/Decreasing Returns
- Principle of Progression
- Principle of Regression
- Principle of Substitution
- Principle of Supply & Demand
- Principle of Surplus
- Productivity
Principle of Anticipation - CORRECT ANSWER Buyers buy the present worth of
future benefits (e.g. thinking about resale value)
,Principle of Balance - CORRECT ANSWER Maximum value is maintained through
balance (e.g. huge house with only one car garage is not balanced)
Principle of Change - CORRECT ANSWER A value today is valid only for today (e.g.
large portion of the community will be losing their jobs = lower value of house as lower
demand)
Principle of Competition - CORRECT ANSWER Excess profit breeds ruinous
competition (two people see same opportunity and both jump in; neither will achieve their
anticipated profits)
Principle of Conformity - CORRECT ANSWER Reasonable conformance with
existing standards protects value (houses that conform with one another hold their value)
Principle of Consistent Use - CORRECT ANSWER No double dipping when
analyzing value (can't give value to the house on a commercial property worth building on;
must be viewed together as you'd have to renovate the house to use it commercially)
Principle of Contribution - CORRECT ANSWER Value relates to contribution; not
cost (owner wants to put in a pool that cost $10,000 but appraiser says it will only improve
value of house by $7,000)
Principle of External Factors - CORRECT ANSWER Things nearby can influence
value (two comparable houses purchased on a quiet vs. noisy street = noisy street will have
decreased value)
Principle of Highest and Best Use - CORRECT ANSWER Focus on the use that will
produce the greatest return (look at the property's current and potential use = large house on
lot that a four-plex could be built; value can increase based on this possibility)
, Principle of Increasing/Decreasing Returns - CORRECT ANSWER More is not
necessarily better (building one garage may increase value, but building two more wont
increase 3x; it reaches a point)
Principle of Progression - CORRECT ANSWER The smallest house on the street
might be the best buy (when houses aren't similar; the poorest property increases in value)
Principle of Regression - CORRECT ANSWER The largest house on the street might
not be the best buy (when houses aren't similar; the highest value home loses value due to it's
neighbours)
Principle of Substitution - CORRECT ANSWER Buyers look for the best bang for
their buck (they value a home by comparing it to a substitute and choose the best priced one)
Principle of Supply and Demand - CORRECT ANSWER Market forces are always at
work (supply decreases value; demand increases value)
Principle of Surplus Productivity - CORRECT ANSWER Net income flows to the land
(after all costs are satisfied, the net income flows to land and establishes the value of that
land)
Definition of Appraisal - CORRECT ANSWER The act or process of estimating value
and providing an opinion concerning that value.
8 Steps of the Appraisal Process - CORRECT ANSWER 1) Define the problem
2) Preliminary inspection & planning the work
3) Data collection & analysis
4) Apply the cost approach
5) Apply the direct comparison approach
6) Apply the income approach
7) Reconciliation and final estimate
8) Write the appraisal report
UPDATED QUESTIONS AND CORRECT
ANSWERS
Subjective Value - CORRECT ANSWER the perception of value in the minds of the
buyer and seller
Objective Value - CORRECT ANSWER related to the direct cost of creating (e.g.
acquiring a lot and building a home)
Types of value found in the Canadian Economy - CORRECT ANSWER -insurable;
book
-appraised
-salvage
-assessed
-liquidation
-loan
-sentimental
Three approaches that appraisers use to establish an estimate of value - CORRECT
ANSWER -cost approach (actual cost)
-income approach (subjective value)
-direct comparison approach (subjective value)
market price - CORRECT ANSWER the price for an individual property
market value (aka value in exchange) - CORRECT ANSWER an estimate of value
arising from many sales (market prices)
,Definition of Market Value - CORRECT ANSWER The most probable price, as of a
specified date, in cash, or in terms equivalent to cash or in other precisely revealed terms, for
which the specified property rights should sell after reasonable exposure in a competitive
market under all conditions requisite to a fair-sale, with the buyer and seller each acting
prudently, knowledgeably, and for self-interest, and assuming that neither is under undue
duress.
The 4 assumptions of market value - CORRECT ANSWER 1) reasonable time
2) no undue pressure
3) prudent behaviour
4) informed buyer and seller
15 Principles of Value - CORRECT ANSWER - Principle of Anticipation
- Principle of Balance
- Principle of Change
- Principle of Competition
- Principle of Conformity
- Principle of Consistent Use
- Principle of Contribution
- Principle of External Factors
- Principle of Highest & Best Use
- Principle of Increasing/Decreasing Returns
- Principle of Progression
- Principle of Regression
- Principle of Substitution
- Principle of Supply & Demand
- Principle of Surplus
- Productivity
Principle of Anticipation - CORRECT ANSWER Buyers buy the present worth of
future benefits (e.g. thinking about resale value)
,Principle of Balance - CORRECT ANSWER Maximum value is maintained through
balance (e.g. huge house with only one car garage is not balanced)
Principle of Change - CORRECT ANSWER A value today is valid only for today (e.g.
large portion of the community will be losing their jobs = lower value of house as lower
demand)
Principle of Competition - CORRECT ANSWER Excess profit breeds ruinous
competition (two people see same opportunity and both jump in; neither will achieve their
anticipated profits)
Principle of Conformity - CORRECT ANSWER Reasonable conformance with
existing standards protects value (houses that conform with one another hold their value)
Principle of Consistent Use - CORRECT ANSWER No double dipping when
analyzing value (can't give value to the house on a commercial property worth building on;
must be viewed together as you'd have to renovate the house to use it commercially)
Principle of Contribution - CORRECT ANSWER Value relates to contribution; not
cost (owner wants to put in a pool that cost $10,000 but appraiser says it will only improve
value of house by $7,000)
Principle of External Factors - CORRECT ANSWER Things nearby can influence
value (two comparable houses purchased on a quiet vs. noisy street = noisy street will have
decreased value)
Principle of Highest and Best Use - CORRECT ANSWER Focus on the use that will
produce the greatest return (look at the property's current and potential use = large house on
lot that a four-plex could be built; value can increase based on this possibility)
, Principle of Increasing/Decreasing Returns - CORRECT ANSWER More is not
necessarily better (building one garage may increase value, but building two more wont
increase 3x; it reaches a point)
Principle of Progression - CORRECT ANSWER The smallest house on the street
might be the best buy (when houses aren't similar; the poorest property increases in value)
Principle of Regression - CORRECT ANSWER The largest house on the street might
not be the best buy (when houses aren't similar; the highest value home loses value due to it's
neighbours)
Principle of Substitution - CORRECT ANSWER Buyers look for the best bang for
their buck (they value a home by comparing it to a substitute and choose the best priced one)
Principle of Supply and Demand - CORRECT ANSWER Market forces are always at
work (supply decreases value; demand increases value)
Principle of Surplus Productivity - CORRECT ANSWER Net income flows to the land
(after all costs are satisfied, the net income flows to land and establishes the value of that
land)
Definition of Appraisal - CORRECT ANSWER The act or process of estimating value
and providing an opinion concerning that value.
8 Steps of the Appraisal Process - CORRECT ANSWER 1) Define the problem
2) Preliminary inspection & planning the work
3) Data collection & analysis
4) Apply the cost approach
5) Apply the direct comparison approach
6) Apply the income approach
7) Reconciliation and final estimate
8) Write the appraisal report
