When an appraiser concludes that the cost approach results in a significantly higher value than the sales comparison approach, this may indicate:
Why The building has significant depreciation or the market values the property below replacement cost Is Correct
Answer B: The building has significant depreciation or the market values the property below replacement cost
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.
Key Property Valuation Terms in This Question
People Also Study
Related Alabama Questions
- When using the sales comparison approach to value a property in Alabama, the appraiser:Property Valuation
- An appraiser estimates a property at $425,000 using the sales comparison approach and $410,000 using the cost approach. The final reconciled value is $420,000. The sales comparison approach received the most weight. This is appropriate because:Real Estate Math
- 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 appraiser determines a property's value by the cost to replace it, minus depreciation, plus land value. This is the:Property Valuation
- 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
- A building has a replacement cost new of $500,000. It has a remaining economic life of 30 years and a total economic life of 50 years. What is the accrued depreciation using straight-line method?Real Estate Math
Key Terms to Know
A 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.
AppraisalA 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.
Math Concepts
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 →