Property Valuation
Which appraisal approach involves estimating the value of a property by calculating the cost to reproduce or replace the improvements plus the land value?
ASales comparison approach
BIncome approach
CCost approach✓ Correct
DGross rent multiplier approach
Explanation
The cost approach estimates value as the land value plus the depreciated cost of the improvements (buildings). It is especially useful for new construction, special-use properties, or properties with few comparable sales.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
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.
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
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