Property Valuation
In the sales comparison approach, adjustments to comparables are made because:
AThe appraiser must account for commission rates
BNo two properties are exactly alike and differences must be quantified✓ Correct
CComparable sales must be from the same year
DAdjustments are required by Minnesota law for every sale
Explanation
Adjustments reconcile differences between the subject property and each comparable. Positive adjustments add value (comparable is inferior), negative adjustments subtract value (comparable is superior).
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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.
Math Concepts
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