Property Valuation
Physical deterioration that is 'curable' in the cost approach means:
AThe item needs to be replaced by a licensed contractor
BThe cost to cure the deficiency is less than or equal to the value added by curing it✓ Correct
CThe deterioration was caused by the current owner
DThe deterioration is visible to the naked eye
Explanation
Curable physical deterioration exists when the cost to remedy the deficiency is equal to or less than the value it adds to the property. Deferred maintenance items that are economically worthwhile to fix are considered curable.
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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.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
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.
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