Property Valuation
In Iowa, the cost approach to value estimates property value by:
AComparing recent sales prices of similar properties
BEstimating the cost to reproduce or replace improvements, less depreciation, plus land value✓ Correct
CCapitalizing the net operating income
DMultiplying gross rents by a market multiplier
Explanation
The cost approach calculates value as: Land Value + (Reproduction or Replacement Cost New - Depreciation). It is most useful for special-use properties, new construction, and insurance purposes.
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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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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.
Math Concepts
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