Property Valuation
In Missouri, a property that is 'under-improved' relative to its highest and best use is one where:
AThe improvements exceed the land's value
BThe land's potential value exceeds the contribution of the existing improvements✓ Correct
CThe property has too many improvements
DThe property is over-assessed
Explanation
An under-improved property has improvements that don't fully utilize the land's potential—the land's value exceeds what the current improvements contribute. Redevelopment may be economically justified.
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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.
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.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
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