Property Valuation
The sales comparison approach to value is MOST appropriate for appraising:
AA large income-producing commercial warehouse
BA single-family residential property✓ Correct
CA special-purpose property such as a church
DVacant timberland in rural Maine
Explanation
The sales comparison approach is most appropriate for single-family residential properties because there are usually sufficient recent comparable sales to provide meaningful market data.
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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.
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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