Property Valuation
In Nevada, when is the cost approach most appropriate for appraisal?
AFor older homes in established neighborhoods
BFor special-purpose properties, new construction, or when few comparable sales exist✓ Correct
CFor all residential properties regardless of age
DFor raw land with no improvements
Explanation
The cost approach is most appropriate for special-purpose properties (churches, schools), new construction, or unique properties with few comparable sales. It estimates value as land value plus depreciated cost of improvements.
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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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