Property Valuation
In Arizona, the 'cost to cure' approach in appraisal means:
AThe cost of environmental remediation
BThe cost to correct a specific physical or functional deficiency, which equals the depreciation only if the cure cost does not exceed the resulting value increase✓ Correct
CThe cost to replace the entire building
DThe cost to bring a property into building code compliance
Explanation
Cost to cure is the expenditure required to fix a specific deficiency. If the cost to cure is less than the resulting value increase, the item is 'curable'—the depreciation equals the cost to cure.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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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