Property Valuation
The principle of conformity holds that a property achieves maximum value when:
AIt is the most unique property in the neighborhood
BIt is similar in size, style, and use to surrounding properties✓ Correct
CIt has the highest improvements of any property in the area
DIt is located on a corner lot
Explanation
The principle of conformity states that properties achieve maximum value when they conform to the standard of the neighborhood — properties that are consistent with surrounding homes benefit from that conformity.
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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.
AppraisalA 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.
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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