Property Valuation
What is the cost approach to value?
AEstimating value based on comparable sales
BEstimating value based on the cost to reproduce or replace the improvements plus land value, minus depreciation✓ Correct
CEstimating value based on rental income
DEstimating value based on the original purchase price
Explanation
The cost approach estimates value as: Land Value + Cost to Reproduce/Replace Improvements - Depreciation. It is most useful for new construction and special-use properties.
Related California Property Valuation Questions
- A property's assessed value is $360,000 for tax purposes. A comparable home on the same street recently sold for $600,000. What assessment ratio is being applied?
- The income approach to value is most appropriate for:
- What is 'depreciation' in the cost approach to appraisal?
- Functional obsolescence refers to:
- A property generates annual rental income of $96,000. An appraiser uses a gross rent multiplier (GRM) of 13 to estimate value. What is the indicated value?
- What is a Broker Price Opinion (BPO) and how does it differ from an appraisal?
- What is a capitalization rate (cap rate)?
- What is the 'principle of conformity' in real estate appraisal?
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