Property Valuation
The 'cost approach' is most reliable for appraising which type of property?
A40-year-old residential homes
BSpecial-use or public properties (schools, churches, government buildings) where comparable sales are rarely available✓ Correct
CIncome-producing apartment complexes
DVacant commercial land
Explanation
The cost approach is most reliable for special-use properties (schools, churches, hospitals) and new construction where comparable sales are scarce. It is less reliable for older properties due to difficulty in estimating accumulated depreciation.
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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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