Real Estate Math
A Massachusetts property's replacement cost is $450,000. The land is valued at $120,000. The building has an effective age of 12 years with a total economic life of 50 years. What is the indicated value using the cost approach?
A$462,000✓ Correct
B$450,000
C$570,000
D$540,000
Explanation
Depreciation = 12/50 = 24%. Depreciated building value = $450,000 × (1 − 0.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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