Property Valuation
The 'cost approach' gives the most reliable indication of value when:
AThere are many comparable sales available
BThe property is new or special-use with limited comparable sales✓ Correct
CThe property generates substantial income
DThe market is declining
Explanation
The cost approach is most reliable for new construction (minimal depreciation) and special-use properties (churches, schools, utilities) where comparable sales are scarce.
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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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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.
Math Concepts
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