Property Valuation
A Minnesota appraiser adjusts a comparable upward by $12,000 because the subject property has a finished basement that the comparable lacks. This adjustment reflects:
AThe cost to finish a basement in the comparable property
BThe market value buyers assign to finished basements in that area✓ Correct
CA required adjustment mandated by FHA guidelines
DThe assessed value differential between the two properties
Explanation
Appraisal adjustments should reflect the market value participants place on a feature, not the cost to add that feature. Market-extracted adjustments are derived from paired sale analysis.
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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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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.
Math Concepts
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