Property Valuation
The sales comparison approach to value is MOST appropriate for appraising:
AA large industrial warehouse
BA single-family residential property✓ Correct
CAn income-producing apartment complex
DA special-purpose property like a church
Explanation
The sales comparison approach is most commonly used for single-family homes because there are generally enough comparable sales to make meaningful value comparisons.
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Key Terms to Know
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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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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