Property Valuation
What is the purpose of the 'three approaches to value' in Delaware appraisal practice?
AEach approach provides an independent estimate, and their agreement or disagreement helps confirm the accuracy of the final value opinion✓ Correct
BLenders require three separate appraisals from different appraisers
CEach approach covers a different type of property: cost for residential, income for commercial, sales for land
DUsing three approaches is required by USPAP for all residential appraisals
Explanation
The three approaches (cost, sales comparison, income) provide independent value indications. By analyzing all three and reconciling any differences, the appraiser cross-checks their conclusions and arrives at a well-supported final value opinion.
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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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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