Property Valuation
An appraiser working on a Nebraska subdivision notes that smaller homes near the subdivision entrance sell for more per square foot than larger homes at the back. This illustrates the principle of:
AContribution✓ Correct
BProgression
CRegression
DPlottage
Explanation
The principle of contribution states that each component contributes to value only what its presence adds to the whole. Location within the subdivision (near entrance) contributes value per sq ft that location at the back does not.
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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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