Real Estate Math
A property is appraised at $350,000 using the cost approach: land = $75,000, replacement cost new = $350,000, total depreciation = $75,000. What is the indicated value?
A$275,000
B$350,000✓ Correct
C$425,000
D$300,000
Explanation
Cost approach value = Land + (Replacement Cost New − Depreciation) = $75,000 + ($350,000 − $75,000) = $75,000 + $275,000 = $350,000.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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