Property Valuation
The cost approach to appraisal is most useful for:
AResidential properties in active resale markets
BIncome-producing apartment buildings
CSpecial-use properties like churches or schools with few comparables✓ Correct
DLand-only valuations
Explanation
The cost approach is most reliable for special-use properties (churches, schools, government buildings) that rarely sell, making comparables scarce. It estimates value as land value plus depreciated replacement cost of improvements.
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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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market 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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