Property Valuation
When would a Nevada appraiser most likely use the cost approach as the primary valuation method?
AWhen appraising a 30-year-old single-family home in a mature Las Vegas neighborhood
BWhen appraising a newly constructed school or church where no comparable sales exist✓ Correct
CWhen appraising a highly active rental apartment complex
DWhen appraising a vacant lot for residential development
Explanation
The cost approach is most reliable for new construction and special-purpose properties (schools, churches, government buildings, fire stations) where comparable sales are scarce or nonexistent. For new construction, depreciation is minimal so reproduction/replacement cost closely approximates value.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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.
Math Concepts
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