Property Valuation
When appraising a new construction home in Minnesota using the cost approach, the appraiser estimates depreciation by:
AUsing the age-life method based on actual and economic age✓ Correct
BApplying the income capitalization formula
CComparing the home to three recent sales
DCalculating the mortgage payment
Explanation
Depreciation in the cost approach is commonly estimated using the age-life (straight-line) method, which calculates depreciation as a percentage based on effective age divided by total economic life. Other methods include the breakdown method and the sales extraction method.
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