Valuation and Financing Practice Question

Question

An escrow officer requests clarification from the broker involving income approach. What should a California real estate licensee understand? (Item 45)

Answer choices

1. A. Use income capitalization concepts for income-producing property.
2. B. It is primarily a tax rule with no effect on brokerage practice.
3. C. It removes the need for written disclosure if the licensee believes the client already knows.
4. D. It can be ignored if the transaction is expected to close quickly.

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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