Real Estate Appraisal Practice Exam

What's the most common form of property ownership on which most appraisals would be based?

1. Leasehold

2. Condominium

3. Fee simple

4. Cooperative

The correct answer is: Fee simple

The most common form of property ownership on which most appraisals are based is fee simple. This form of ownership represents the highest level of ownership rights in real estate, granting the owner full control over the property, including the right to use, lease, sell, or bequeath it. Fee simple ownership is often preferred in real estate appraisals because it typically reflects the most straightforward and comprehensive ownership scenario. Since fee simple ownership encompasses the entire bundle of rights associated with a property, it provides appraisers with a clear basis to determine fair market value. In contrast, leasehold ownership refers to property that is leased from a landlord for a specific term, which complicates the appraisal process as appraisers must consider both the value of the lease and the terms of the lease. Condominium ownership involves shared ownership of common areas along with individual unit ownership, requiring additional analysis regarding shared amenities and governance. Cooperative ownership signifies that members hold shares in a corporation that owns the property, which adds layers of complexity since the value is contingent on the overall health and governance of the cooperative. Given these distinctions, fee simple ownership stands out as the most straightforward and commonly used basis for appraisals, making it the correct choice.