Property Valuation
In Montana, when an appraiser concludes a property's value is $325,000 'as-is' but $380,000 'subject to completion of planned renovation,' the difference reflects:
AThe appraiser's fee for two separate appraisals
BThe cost and value contribution of the proposed renovation to the property✓ Correct
CMarket value versus assessed value
DThe appraiser's uncertainty about the current value
Explanation
The difference between as-is and as-improved value reflects the value contribution of the planned renovation (after accounting for costs and market reaction). If the renovation costs $40,000 but adds $55,000 in value, it is 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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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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