Real estate exam terms
9 terms, each with a plain definition, the term it is most often confused with, and how the license exam actually asks about it.
The legally permissible, physically possible, financially feasible and maximally productive use
All four tests must be met, applied in that order, with maximal productivity as the final filter among the uses that survive the first three. It is determined for the land as though vacant, as well as for the property as improved.
The owner’s intention is not one of the tests, and offering it as an answer is the standard distractor.
The price a property actually sold for
A recorded fact rather than an opinion. It may sit above or below market value depending on what pressures the parties were under — a forced sale, an uninformed buyer, a relationship between the parties.
The list price is neither market price nor market value. It is an asking figure, and questions sometimes offer it as a distractor for both.
The most probable price a property should bring in a fair, open sale
An opinion, and a conditional one: it assumes a willing buyer and a willing seller, both informed, neither under duress, and a reasonable exposure to the market. Change any of those assumptions and the figure changes with it.
Set against market price, which is a historical fact — what a property actually sold for. A distressed sale produces a market price that is not market value.
The increase in value from combining adjacent parcels into one larger site
Two lots worth more together than apart have plottage value. It appears where the combined parcel unlocks a use neither could carry alone — a development footprint, a frontage, a parking requirement that only the larger site satisfies.
Assemblage is the process and plottage is the increment, and nothing guarantees the increment exists. A badly assembled site can be worth less than the sum of its parts.
Assemblage is the act of buying and combining the parcels; plottage is the added value that results. Items swap the two words on purpose.
Value comes from the benefits a buyer expects to receive in the future
A buyer pays for what a property will do for them from the purchase onward — income, use, an expected gain — and not for what it has already done for someone else. It is the principle the entire income approach rests on, since capitalising an income stream is anticipation written as arithmetic, and it is why the announcement of a transit line moves prices long before any track is laid.
It appears in "which principle is illustrated" items, set against substitution and contribution. Any fact pattern phrased around future benefits, expectations or a change still to come is anticipation.
Value is maximised where the properties in an area are reasonably similar
Not uniformity for its own sake. A neighborhood of broadly comparable properties gives buyers a stable frame of reference and gives appraisers a supply of usable comparables, and both of those hold value up. Progression and regression are what conformity looks like when it is broken at one end of a street or the other.
Contribution asks what one improvement adds to one property. Conformity asks whether the property fits the neighborhood at all, and an over-improvement usually fails both tests at once.
Named directly, and it is also the principle underneath any item about the largest house on a modest street or a single luxury build in an area of small ones.
An improvement is worth what it adds to the whole, not what it cost
Spend $40,000 on a pool and the property may be worth $15,000 more. The difference is not an error — it is the principle. It underlies every question about over-improvement and every remodeling decision an owner ever regrets.
Whenever a question gives you a cost and a value change and asks what principle is at work, this is it.
A buyer will pay no more than the cost of an equally desirable alternative
The foundation under all three approaches to value. It is why comparable sales work at all, why the cost approach makes sense, and why an income property is priced against the returns available elsewhere.
Named directly, and also implied whenever an item describes a buyer choosing between two similar properties.
A property’s value is pulled toward the values of those around it
Progression lifts the least expensive house on a street of larger homes; regression drags down the finest house in a modest neighborhood. Both are consequences of the principle of conformity — that value is maximised where properties are reasonably similar.
The classic warning against buying the best house on the worst street is a regression question wearing ordinary clothes.
Sources
Key factual claims on this page are grounded in the documents below, with the day each was read. Rules and requirements change — open the source if you need today's wording.
Page facts last verified September 11, 2026.
Sitting the license exam? Start with a practice test.
Free practice testIndependent exam preparation. Real Estate Exam Bank is not a state-approved pre-licensing course and completing anything here does not satisfy any state education requirement. Not affiliated with, endorsed by, or authorized by any state real estate commission, Pearson VUE, or PSI. Practice questions here are original study material, not the official exam.