Property Valuation
The principle of conformity suggests that a property value is maximized when:
AThe property is unique and distinctive in its neighborhood
BLand uses in the area are similar and harmonious✓ Correct
CThe property has more features than neighboring properties
DThe property's use conforms to the owner's desired use
Explanation
The principle of conformity states that a property achieves maximum value when it conforms to the predominant land use patterns in the neighborhood. A single-family home in a neighborhood of similar homes benefits from conformity.
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Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
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