Certified Residential Appraiser Practice Exam

What term describes the LUMP-SUM benefit received by an investor upon termination of an investment?

1. Fixed Expenses

2. Reversion

3. Discount Rate

4. Safe Rate

The correct answer is: Reversion

The term that describes the lump-sum benefit received by an investor upon termination of an investment is known as "Reversion." In real estate and investment contexts, reversion refers to the value or cash flow that an investor receives at the end of an investment period. This can occur when a property is sold, or an investment is liquidated, allowing for the realization of any accumulated gains. Reversion is significant because it reflects the terminal value of an investment after all operational income has been received, providing a complete view of the financial benefits of the investment. The concept is essential for appraisers and investors in evaluating potential returns and understanding the overall profitability of a real estate investment. The other terms do not apply in this context. Fixed expenses refer to ongoing costs that do not vary with occupancy or revenue levels; the discount rate is a financial term that reflects the time value of money, typically used in present value calculations; and the safe rate refers to a theoretical rate of return on an investment considered free from risk, which is not associated with the lump-sum benefit upon termination of an investment.