Property Valuation
What is the 'cost approach' to property valuation and when is it most useful in Nevada?
AIt values property based on rental income alone
BIt estimates value by calculating the cost to replace the improvements (depreciated) plus the land value; most useful for new construction, special-use properties, and insurance purposes✓ Correct
CIt values property by comparing it to three recent sales
DIt applies only to vacant land in Nevada
Explanation
The cost approach estimates value as: Land Value + Replacement Cost New of Improvements - Depreciation. It is most reliable for new construction (minimal depreciation), unique/special-use properties (few comparables), and public buildings. In Nevada, it is used for new custom homes in Summerlin, schools, churches, and industrial facilities where sales comparables may be limited.
Related Nevada Property Valuation Questions
- What is the economic life versus the physical life of a building in Nevada appraisal?
- What is the 'principle of anticipation' in real estate appraisal?
- What is 'external obsolescence' in real estate appraisal and provide a Nevada example?
- What is 'reconciliation' in the appraisal process?
- What is a 'dark store' theory and why is it controversial for Nevada property tax assessments?
- What is 'market conditions adjustment' in Nevada appraisal and why is it important?
- What is 'eminent domain' value determination and how is 'just compensation' calculated in Nevada?
- What is a 'paired sales analysis' in real estate appraisal and how is it used in Nevada?
Practice More Nevada Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Nevada Quiz →