Property Valuation
In the cost approach, the 'site value' is estimated as if the land were:
AA. Valued with its existing improvements
BB. Vacant and available for its highest and best use✓ Correct
CC. Assessed at its current tax value
DD. Valued based on adjacent property comparisons only
Explanation
In the cost approach, land is valued separately as if vacant and available for its highest and best use, regardless of the existing improvements. This recognizes that land value is independent of the building constructed on it.
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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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property 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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