California Real Estate Practice Exam

The 4-3-2-1 Rule is particularly useful for appraising what?

1. Commercial buildings

2. Industrial lots

3. Lots of differing depths

4. Single-family homes

The correct answer is: Commercial buildings

The 4-3-2-1 Rule is primarily utilized for appraising single-family homes. This rule helps appraisers quickly estimate the value of a home based on the number of bedrooms and bathrooms, often using a formula that assigns varying weights to these features. For instance, it would suggest that a home with four bedrooms is valued differently than one with three, two, or one bedroom, creating a straightforward framework to gauge value based on the size and amenities of the property. In contrast, commercial buildings, industrial lots, and lots of differing depths have more complex valuation processes that consider additional factors such as income potential, location in relation to business districts, zoning, and specific market demands. Therefore, these types of properties typically do not rely on the 4-3-2-1 Rule as a primary method of valuation, making the focus on single-family homes both appropriate and relevant in this context.