Real Estate Valuation Level 1 Test (Taqeem): free practice test

Start with 10 free questions to see what needs more practice. Finish to see your score, weakest units and every option explained.

Practice test questions with answers and explanations

Try the questions in the test above first, then open each one here to see the correct answer and why every other option is wrong.

01Valuing a building under construction 'as if complete' at the valuation date is an example of:

Practice question Unit: Regulatory framework and International Valuation Standards

AA special assumption ✓ Correct answer
Completion contrary to actual condition at the valuation date is a special assumption.
BA basis of value
A basis of value defines the value premise, not the assumed completion status.
CA departure
A disclosed special assumption does not itself constitute departure from IVS.
DAn ordinary assumption
An ordinary assumption does not assume a known incomplete building is complete.

Reference: International Valuation Standards (IVSC)

02The principle of substitution says a prudent buyer:

Practice question Unit: Basic real estate valuation principles

APrefers new building
A substitute can be old or new if utility is equivalent.
BAlways buys the dearest
Paying more merely because a property is dearer contradicts substitution.
CPays any price for a property he likes
Personal liking does not justify unlimited payment by a prudent market buyer.
DPays no more than the cost of an equally useful substitute ✓ Correct answer
An equally useful available substitute limits what a prudent buyer pays.

Reference: Real estate valuation principles (Taqeem Academy course 102)

03An owner adds a pool costing SAR 200,000 and market value rises by 120,000. By contribution, the pool is worth:

Practice question Unit: Basic real estate valuation principles

ASAR 200,000, the actual cost
200000 is cost; contribution is the increase in market value.
BSAR 120,000 ✓ Correct answer
The pool contributes SAR 120000, the stated market-value increase.
CSAR 80,000
80000 is the unrecovered cost, not the value contribution.
DSAR 320,000
320000 incorrectly adds construction cost to its market contribution.

Reference: Real estate valuation principles (Taqeem Academy course 102)

04If the valuer finds a material error after issuing the report, he should:

Practice question Unit: Real estate valuation procedures

ARaise his fee
Raising the fee does not correct the misleading conclusion.
BInform the client and correct the report ✓ Correct answer
Notify the client and issue a corrected report addressing the material error.
CDelete it
Deleting a report does not inform users who already rely on it.
DIgnore it since the job is done
Issuance does not remove the duty to address a known material error.

Reference: Real estate valuation procedures (Taqeem Academy course 103)

05A building's new cost is SAR 1m, effective age 10 and total economic life 50. Age-life depreciation is:

Practice question Unit: Cost approach, building materials and safety

Reference: Cost approach (Taqeem Academy course 104); IVS

06A poor layout means the bedrooms can only be reached through the kitchen. What type of depreciation does this illustrate?

Practice question Unit: Cost approach, building materials and safety

AFunctional obsolescence ✓ Correct answer
An inconvenient internal layout is a design-related loss of utility: functional obsolescence.
BPhysical deterioration from wear
Physical deterioration is wear or damage, not the described layout flaw.
CExternal obsolescence
External obsolescence arises from factors outside the property.
DPositive externality
A positive externality adds benefit from outside; this layout reduces internal utility.

Reference: Cost approach (Taqeem Academy course 104); IVS

07A 500 m² comparable plot sold for SAR 600,000. A similar 450 m² subject is worth about:

Practice question Unit: Market and income approaches

ASAR 600,000
600000 applies the 500 m² sale total to a smaller subject.
BSAR 666,000
666000 reverses the area ratio and increases the smaller plot’s value.
CSAR 540,000 ✓ Correct answer
Unit price = 600000/500 = 1200; 450×1200 = SAR 540000.
DSAR 450,000
450000 assumes a unit price of 1000 instead of 1200.

Reference: Market and income approaches (Taqeem Academy course 105); IVS

08Net operating income (NOI) equals:

Practice question Unit: Market and income approaches

AMonthly rent × 12
Annualizing rent alone ignores vacancy, other income and operating expenses.
BPrice × 8%
Price times an assumed rate is not the definition of NOI.
CPotential gross income − debt service − book depreciation
Debt service and book depreciation are excluded from property NOI.
DEffective gross income − operating expenses ✓ Correct answer
NOI equals effective gross income minus property operating expenses.

Reference: Market and income approaches (Taqeem Academy course 105); IVS

09NOI SAR 120,000, market cap rate 8%. Direct capitalisation value:

Practice question Unit: Market and income approaches

Reference: Market and income approaches (Taqeem Academy course 105); IVS

10The 'financially feasible' test means the use:

Practice question Unit: Market analysis and highest and best use

AIs possible
Physical possibility tests the site’s characteristics, not financial returns.
BEarns enough to cover costs and a return on capital ✓ Correct answer
A financially feasible use covers costs and the required return on capital.
CGives the highest value among feasible uses
Highest value among feasible uses is the separate maximally productive test.
DIs legal
Legal permission is necessary but does not prove financial feasibility.

Reference: Market analysis and HBU (Taqeem Academy course 106)