California Real Estate Practice Exam

Which of the following would appraisers least likely use the "gross income" appraisal technique?

1. Commercial

2. Industrial

3. Public buildings

4. Residential apartments

The correct answer is: Commercial

The "gross income" appraisal technique is primarily utilized for properties that generate income, such as residential apartments, commercial buildings, and industrial properties. This technique focuses on the revenue that a property can produce, considered essential for evaluating income-generating real estate. In this context, residential apartments are often appraised using this method due to their ability to generate consistent rental income, making them suitable for gross income assessments. Public buildings, on the other hand, are primarily funded through taxes or government budgets rather than generating rental income. Thus, appraisers are less likely to apply the gross income technique to public buildings because these properties do not follow the same income-producing model as the other property types mentioned. The non-reliance on market rents or income generation is why the gross income appraisal technique is least likely to be used for public buildings. Therefore, the choice indicating commercial properties is less accurate because they do generate income, while public buildings would not be analyzed through this income-based lens.