Property Valuation
Which valuation approach is MOST appropriate for appraising a single-family owner-occupied home?
AIncome approach only
BCost approach only
CSales comparison approach primarily✓ Correct
DGross rent multiplier analysis
Explanation
The sales comparison approach is the primary method for residential properties because there are usually enough comparable sales to support a strong value indication.
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Key Terms to Know
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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Math Concepts
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