Replacement cost in the cost approach uses the cost to build a structure:
Why Of equal utility using modern materials and current construction methods Is Correct
Answer B: Of equal utility using modern materials and current construction methods
Exam Tip: Property Valuation
Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.
People Also Study
Related Alabama Questions
- Reproduction cost and replacement cost in the cost approach differ because:Property Valuation
- A property's replacement cost new is $380,000. The land value is $60,000. Accrued depreciation is $95,000. What is the indicated value by the cost approach?Real Estate Math
- An Alabama appraiser uses the income approach to value a rental property. The key formula is:Property Valuation
- The cost approach to value in Alabama is best used for:Property Valuation
- The cost approach to appraisal is MOST reliable when:Property Valuation
Key Terms to Know
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Study This Topic
Practice More Alabama Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Alabama Quiz →