Property Valuation
When appraising a Bozeman luxury home in a market with limited luxury comparables, an appraiser may need to:
AUse only the cost approach since no comparables exist
BExpand the search area to include competing markets with similar luxury properties, making appropriate adjustments for location differences✓ Correct
CDecline the appraisal assignment entirely
DUse only the income approach regardless of property type
Explanation
When local comparables are insufficient (as may occur in luxury or unique property markets), appraisers may expand their search to competing markets, making appropriate time and location adjustments to support their value conclusion.
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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.
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