Valuation and Financing Practice Question

Question

A seller is reviewing documents before accepting an offer involving income approach. What should a California real estate licensee understand? (Item 125)

Answer choices

1. A. Use income capitalization concepts for income-producing property.
2. B. It is valid only when the buyer pays cash and no lender is involved.
3. C. It prevents any later disclosure, even when new facts become known.
4. D. It applies only to commercial property and never to residential transactions.

Correct Answer

A. Use income capitalization concepts for income-producing property.

Explanation

The correct answer is A because income approach requires candidates to use income capitalization concepts for income-producing property. The other options overstate the effect of custom, oral agreement, escrow, or independent salesperson action and do not reflect safe California exam practice.

Question details

• Difficulty: medium
• Domain: Valuation and Financing
• Objective: income approach

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