Property Valuation
The cost of an improvement refers to:
AThe market value of the improvement
BThe amount spent to create the improvement✓ Correct
CThe depreciated value of the improvement
DThe replacement cost of the improvement
Explanation
Cost is the actual amount spent to construct or acquire an improvement. Cost does not equal value — improvements may add more or less to market value than they cost, depending on market conditions and functional utility.
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- Physical deterioration that can be corrected at a cost that is less than the resulting increase in value is called:Property Valuation
- The cost approach to value is MOST appropriate for appraising:Property Valuation
- The cost approach to value is most reliable for:Property Valuation
- Market value is best defined as:Property Valuation
Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
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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