Entrepreneurial profit is included in the cost approach because:
Why It compensates the developer for the risk and effort of creating the project Is Correct
Answer B: It compensates the developer for the risk and effort of creating the project
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.
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Key Terms to Know
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
Math Concepts
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