Property Valuation
In Michigan appraisal, 'effective age' of a building refers to:
AThe actual calendar age of the building since construction
BThe age indicated by the building's condition and utility, which may differ from actual age✓ Correct
CThe age of the oldest major system in the building
DThe age listed on the property tax record
Explanation
Effective age reflects the building's apparent age based on its condition, maintenance, and utility rather than its actual calendar age. A well-maintained 40-year-old home may have an effective age of 20 years; a poorly maintained 10-year-old building may have a higher effective age.
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Key Terms to Know
Appraisal
A 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.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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