Property Valuation
In Alaska, when appraising a property that has recently been renovated, an appraiser should:
AIgnore the renovation if it occurred within the last 6 months
BReflect the renovation in both the effective age and the adjusted values used in the approaches to value✓ Correct
COnly use the cost approach since renovation costs are known
DAlways use the 'as-is, unrenovated' value
Explanation
A recent renovation should be reflected in both the effective age (reducing it to reflect better condition) and in the value conclusion (through appropriate adjustments in the sales comparison approach and/or the cost approach). Renovations that meaningfully improve the property's condition and utility should increase the appraised value.
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Key Terms to Know
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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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