Property Valuation
Which of the following is NOT a valid method to estimate accrued depreciation in the cost approach?
AAge-life method (economic age-life ratio)
BObserved condition (breakdown) method
CSales comparison extraction method
DGross rent multiplier method✓ Correct
Explanation
The GRM method is an income valuation shortcut — it is not used to estimate depreciation in the cost approach. Valid depreciation estimation methods include the age-life method, observed condition method, and extraction from comparable sales.
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Key Terms to Know
Gross Rent Multiplier (GRM)
A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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