Property Valuation
A Nevada appraiser is appraising a custom home in Henderson. No comparable sales exist within 1 mile. What should the appraiser do?
ARefuse the assignment due to insufficient comparables
BExpand the search area and/or time frame for comparables, and explain the expanded search in the appraisal report✓ Correct
CUse the listing price as the value without comparables
DApply only the cost approach since no comparables exist
Explanation
When insufficient comparable sales exist within the typical search parameters (1 mile, 6-12 months), appraisers must expand their search geographically or temporally and disclose this in the report. The appraiser explains why expanded comparables were used and makes appropriate adjustments.
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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.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
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