When using the sales comparison approach to value a property in Alabama, the appraiser:
Why Compares the subject property to recent sales of similar properties Is Correct
Answer C: Compares the subject property to recent sales of similar properties
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.
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- In the sales comparison approach, a comparable property that sold for more than the subject property due to a superior feature would require:Property Valuation
- In the sales comparison approach, adjustments are made to the comparable properties to account for differences. If a comparable has a feature the subject property lacks, the adjustment to the comparable is: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
- When an appraiser concludes that the cost approach results in a significantly higher value than the sales comparison approach, this may indicate:Property Valuation
- An Alabama appraiser uses the income approach to value a rental property. The key formula is:Property Valuation
Key Terms to Know
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.
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.
Math Concepts
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