Property Valuation
In Minnesota appraisal practice, 'paired sales analysis' is used to determine the market value of:
AThe entire property by averaging two sale prices
BA specific feature (like a fireplace or garage) by comparing identical properties that differ only in that feature✓ Correct
CThe land separately from the building
DThe cap rate for income properties
Explanation
Paired sales analysis (matched pair analysis) isolates the value contribution of a specific feature by finding two properties that are identical except for the presence or absence of that feature. For example, comparing two similar Minnesota homes—one with a finished basement and one without—to quantify the market value of a finished basement.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
AppraisalA 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.
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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