An appraiser is reconciling three value indicators from the three approaches: Cost approach = $485,000; Sales comparison approach = $475,000; Income approach = $460,000. The subject is an owner-occupied single-family home. Which approach should receive the most weight?
Why Sales comparison approach, because owner-occupied residential buyers base decisions primarily on comparable sales Is Correct
Answer C: Sales comparison approach, because owner-occupied residential buyers base decisions primarily on comparable sales
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.
Key Property Valuation Terms in This Question
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Key Terms to Know
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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