Property Valuation
What is the primary limitation of the sales comparison approach for unique Kansas properties?
AIt only works for commercial properties
BInsufficient comparable sales data for unique properties makes adjustments unreliable✓ Correct
CIt cannot account for recent market changes
DIt requires an income stream to be applicable
Explanation
The sales comparison approach relies on recent comparable sales. For unique properties with few or no true comparables (churches, historic buildings, custom homes), finding reliable comparables is difficult, reducing the approach's reliability.
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Key Terms to Know
Comparable Sales (Comps)
Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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.
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