The cost approach to appraisal is MOST useful for which type of property?
Why Special-purpose properties with few or no comparable sales Is Correct
Answer C: Special-purpose properties with few or no 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
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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