How to Pass the Certified Residential Appraiser Exam in 2022

40% of trainees fail to pass the Certified Residential Appraiser exam the first time.

That’s why I put together this guide. There’s a lot of outdated material out there. Reading this guide might take twenty minutes, I promise it will likely save you hours in the long run.

My name is Phil and I was trainee at Verifiable Value for a year and a half before passing the Certified Residential test last month.

DISCLAIMER: Prior to taking the test, PSI has you sign a contract saying that you will not communicate any testing materials to anyone. None of this material is taken directly from the test.

Additionally, there are NO affiliate links in this post.

Summary: How to Pass the Certified Residential Appraiser Exam

If you aren’t interested in reading this full guide, here’s a short summary:

• Buy CompuCram. 
• Practice test every module into the ground until you score 90%+ three times. 
• Start on the Simulated Exam and score 90%+ at least three times. 
• When you’re taking the test, make sure you understand what the question is asking. 
• Go all out for as long as it takes you to finish.

I’ve also included some other resources that you’ll probably find helpful. This is by no means a definitive guide. A lot of the material out there is outdated and I’m just trying to save you some time. For example, I tried to contact the guy from appraisaltests.com and got nothing back. People say it’s a decent resource, but if it hasn’t been updated in six years, I’m hesitant.

That applies to everything you’re reading here, too. If you’re reading this in 2030, it’s probably not going to be that helpful. It will take care of the broad strokes (~65% of the exam), but not those fine little details (the remaining ~35%). 

If you ask an appraiser who got licensed ten years ago for tips on how to pass, they’re likely to give you advice for a test that, nowadays, looks pretty different.

In order to understand why, let’s go over how the test is structured.

Basic Overview: Test Length and Number of Questions

The exam is 4 hours long and contains 110 questions. 15 of them are non-scored questions that are presented randomly. While they don’t contribute to your overall grade, these questions are necessary for PSI to make the next test. That means there are only 95 questions that count.

In order to pass, you need to earn a scaled score of 75 or more. There are multiple variations of the test. Based on the pass/fail rates of students taking each variation in the past, some are easier and some are more difficult. So, a “scaled” score means that, if you got an easier test, you need to score more than 75 to pass; if you got a hard test, you can score less than 75 and still pass. The scales themselves technically range from 0-110. 

Why You Shouldn’t Skip a Single Question…

All nice in theory, of course, but what does that mean for you? Well, I’ve seen some advice to count how many questions you think you got right and gauge how you’re doing from there. As soon as you get 75, you’re in the clear. While it isn’t bad advice, I’d highly dissuade you from doing that. Not only are there 15 unscored questions per test, but we actually have no idea how the test is scaled. A raw score of 82/95 could be a failing grade and a 67/95 could be a pass. Realistically, I doubt that the scale is THAT severe, but to be on the safe side, go all out the whole time. Don’t assume that just because you think you got 75 right, you can skip the rest.

Every year, they take the hardest, most-missed questions from the previous year to make a new variation. Each year, then, the test becomes more and more difficult. Why? Probably to sell test materials and raise funds for the state.

INSERT PIC OF PASS RATES:

1. The HP-12C

This one’s a no-brainer.

If you don’t have this calculator, you need to buy it. I got away with an emulator online for a little bit during my courses, but I lucked out when my girlfriend’s dad, a retired accountant, pulled a mint HP-12C out of a drawer and handed it to me. Could’ve cried. Felt like God’s will. No one wants to blow $110 on a calculator when you make like $6/hr, but you’re probably gonna have to.

Make sure you know the keystrokes for Six Functions of a Dollar, standard deviation, and mean.

2. CompuCram

CompuCram is solid. They offer a money-back guarantee if you use their program and still fail. In order to qualify for the money-back guarantee, you have to go through every module three times with above an 80%, and then take the simulated exam (125 questions, 4-hour limit) three times and score above 80% each time. I’d recommend 90% as a bare minimum. The simulated exam is fantastic because it trains your mental endurance and replicates the testing environment. However, only ~86% of the people who use CompuCram pass, so drill it into the ground. If you end up being one of the 14%, at least you get your $149 back.

I’d then use that to buy the AI’s Questions and Answers class, but I didn’t personally have to go that far. I’ll probably buy that when I upgrade to Certified General one day. I’ve heard nothing but good things about it. Same with stevewilliamson.com

Also, while studying, I have a saying: “Go with what they say.” Don’t argue with a book. What the book says, the test says.

3. McKissock / Qualifying Education Provider

Go over all of the practice tests from your Qualifying Education provider. I used McKissock for most of my upgrade courses, so I went over the “Comprehensive Exams” at the end of each module. This is important just to get a feel for how similar questions can be worded differently.

If you had the privilege of taking classes from the Appraisal Institute, you’re in luck. Some people report that those classes were all they needed. I was only able to afford one AI class and I loved it. Make sure to go over the exams, though.

4. Need to Know

Here’s a list of concepts that you absolutely need to know.

A. Operating Expense Ratio (OER)

Operating expense ratio uses effective gross income. It’s just expenses divided by EGI.

B. Net Income Ratio (NIR)

Net income ratio is NOI divided by EGI.

C. Mill Rate / Property Taxes

The mill rate is the amount of tax payable per dollar of the assessed value of a property. Most questions involving mills will either give you the mill rate (mills/1000) or the number of mills. If the mills are seven, for example, then for every $1,000 of assessed value, $7 is due in property taxes.

The formula for property tax: 

((Assessed Rate x Mills) / 1000) = Property Taxes

D. PGI to EGI to NOI

PGI is potential gross income. It’s how much the property could rent for in an ideal world. If there are 4 units and they all rent for $500, the PGI per month is $2,000 (4 units x $500 each). All of these figures are annualized, though, so you have to multiply that monthly figure ($2,000) by 12 to get $24,000

EGI is effective gross income. It’s how much the property rents for minus vacancy and collection losses. If the vacancy rate for the area is 4%, then the EGI for our example property is $23,040 ($24,000 – (4% x $24,000)).

NOI is net operating income. It’s how much money the property brings in minus expenses and reserves. This figure doesn’t include debt service or taxes. If there are $250/month in fixed and variable expenses, $100/month in reserves, and an $1,100/month mortgage payment then the NOI of our example property is ($23,040 (EGI) – $4,200 ($350/month in expenses) = $18,840).

E. Cap Rate

Remember that video where Tai Lopez is asked by a viewer what the formula for a cap rate is? Don’t be like Tai Lopez. Know your stuff.

Cap Rate = NOI / Value

F. Four Characteristics of Value

Demand, Utility, Scarcity, Transferability (DUST).

Transferability is also sometimes referred to as effective purchasing power.

G. Various agents of production

Capital, Entrepreneurship, Labor, Land (CELL).

Entrepreneurship isn’t always considered.

H. Broad Forces of Value

Physical, Economic, Governmental, Social (PEGS).

Physical is also sometimes referred to as environmental. If “physical” and “environmental” pop up on the test and both seem like they could be the correct answer, toss a coin. Same goes for “geographical,” unfortunately.

I. Rods

The length of a rod is 16.5 feet.

J. Mile

There are 5,280 feet in a mile.

K. Acres

There are 43,560 square feet in an acre.

L. Sequence of Adjustments

WinTotal does this for you, but you’ll have to memorize it.

1. Property Rights Conveyed.

2. Financing (to arrive at cash equivalency).

3. Conditions of Sale.

4. Expenditures After Sale.

5. Marketing Conditions.

After all of these have been applied, you arrive at what I refer to as the “base price.” From the base price, all other adjustments are made equally and in no specific order.

6. Location, physical differences, etc.

7. Adjusted Sale Price

M. Townships

There are 36 sections in a township.

There are 640 acres in a township section, which measures 1 mile by 1 mile.

5. Word Salads

Understanding the concept is important, but certainly not as important as understanding what the question is asking in the first place.

Here are some common word salads that have stumped me while taking practice tests. As long as you understand what they mean, they’re simple. While the questions on the test aren’t really this oddly worded, they’re still good practice and they’ll cement these concepts in your brain for eternity. 

A. “What is the functional depreciation due to the deficiency?”

Depreciation is a catch-all term for a loss in value. So, another, much-more-human way of asking this question could be: “How much money did the homeowner lose out on because they didn’t install this feature when the home was first constructed?”

Usually the question will include something like: “homes in this market sell for $13,000 less without this feature. Installing the feature today costs $16,000…” along with a bunch of other superfluous information.

Functional depreciation is always the difference between the cost of installing the item today (post-construction) and the cost of installing the item new (during construction).

B. “What is the incurable functional depreciation due to the incurable deficiency?”

I don’t know if the guy who wrote these questions accidentally swallowed a dictionary or what, but this boils down to the difference between the loss in value and the cost if installed new.

C. “What is the curable functional depreciation due to the superadequacy?”

Cost to Remove the Superadequate Item – Salvage Value + Cost to Install a Market Acceptable Item = Curable Functional Depreciation Due To the Superadequacy. 

Put more simply: How much does this all cost (when you factor in how much money you get back from selling the materials)?

D. “The chronological age is 5 years, and the effective age is 2 years. The remaining economic life is 53 years. What is the total economic life?”

If you’re like most people, you think, “Easy. 57 years. Chronological age (actual age) plus remaining economic life. That’s 2 + 55 = 57.” However, the total economic life isn’t the chronological age added to the remaining economic life, it’s the effective age added to the remaining economic life.

I know that sounds confusing and contrary to known facts, but think about it backward:

“The chronological age is 5 years old. There are 53 years remaining in the subject’s economic life. Total economic life is 55 years. What is the effective age?”

The effective age is the total economic life (55) minus remaining economic life (53). The answer is the effective age: 2 years. Chronological age has almost nothing to do with it.

If you then used that same information from above to calculate total economic life, then, you’d have to use the effective age.

E. “A building has a total expected economic life of x years and an effective age of y years.” Similarly: “A building has a remaining economic life of x years and an effective age of y years.”

Watch out for the wording, because the test will invariably have an option that matches what you’d get if you misused the remaining economic life as the total economic life (or vice versa).

7. Additional Resources

• https://quizlet.com/629893763/math-flash-cards/?src=set_page_ssr
• https://quizlet.com/507105266/lesson-7-basic-residential-appraisal-procedures-flash-cards/
• https://appraisalfoundation.sharefile.com/share/view/sd0ae50d73394998a

(The Appraisal Foundation writes the test, so the final item on that list is a good example of how the official test questions are worded).

8. Sources

• https://com.ohio.gov/static/documents/real_PSI_Bulletin_Appraiser.pdf

(Scroll down to the bottom for six very accurate practice test questions)

Study Motivation: Examples of People Failing Licensed Residential, Certified Residential, and Certified General

If you’re having trouble motivating yourself to study for the test, read about these experiences. These people are really smart, but they still struggled. I think one of them even mentioned having a Master’s degree. Appraiser’s Forum also has a thread about someone taking the Certified General test who was working for a company with a “no-fail” policy. He ended up losing his job.

• https://appraisersforum.com/forums/threads/help.221531/
• https://appraisersforum.com/forums/threads/licensed-appraiser-exam-failure.218446/
• https://appraisersforum.com/forums/threads/failed-the-appraiser-exam.102583/
• https://appraisersforum.com/forums/threads/failed-certified-general-exam-twice.217521/
• https://appraisersforum.com/forums/threads/0-for-2-now-on-licensed-appraisal-exam.229129/

9. Closing Thoughts (Read This if You Fail)

Finally, if you fail on the first go, remember that 40% of first-time test takers do, too. It’s not your fault. You probably just couldn’t afford to take classes from the Appraisal Institute, so you had to settle for Hondros and McKissock. You just have to kecoep grappling with the material and you’ll get there.

Keep in mind that the test isn’t real life. If you’re in the position to even take the test, you’ve been practicing as a trainee appraiser for at least a full year. Your supervisor wouldn’t have taken you on if they didn’t see the value in your contributions (they ARE experts at that sort of thing, after all, *winking emoji*).

The basics of real estate valuation are helpful for virtually any career in real estate, whether you’re a broker, investor, analyst, or appraiser — and most appraisers would recommend you to diversify. 

Don’t quit just because of a stupid test.

You’ve got this.

If you have any questions, you can use the “Contact Us” form. I’ll do my best to respond in a timely manner, and I love helping people figure out some of the more difficult questions. It keeps me on my toes and ensures that I don’t forget a lot of the material that I spent so much time studying.