Appraisal

Property Value & Appraisal Appraisal questions appear on nearly every TN Real Estate Salesperson exam, typically accounting for 7–9 questions on the national portion. Mastering the three approaches to value, key principles, and adjustment logic is one of the highest-return study investments you can make. --- ## Why Appraisals Matter in Real Estate An appraisal is a professional, unbiased estimate of a property's market value at a specific point in time. As a salesperson, you won't perform appraisals — but you must understand the process because it affects pricing strategy, financing (lenders require appraisals), and contract contingencies. The exam tests whether you can identify the right approach for a given situation and apply the logic correctly. --- ## The Four Characteristics of Value — DUST Before any approach to value is applied, a property must possess all four characteristics that create market value: | Letter | Characteristic | What It Means | |--------|---------------|---------------| | D | Demand | Buyers must want it | | U | Utility | It must be useful | | S | Scarcity | It cannot be in unlimited supply | | T | Transferability | Ownership must be able to pass to another | If any one of these is missing, a property has little to no market value. --- ## Key Appraisal Principles These principles explain *why* properties are priced the way they are: - Substitution — A buyer won't pay more for a property than the cost of a comparable substitute. This principle underlies all three approaches to value. - Highest and Best Use — A property is appraised at the use that is legally permissible, physically possible, financially feasible, and maximally…