Property Valuation
In a NJ appraisal, the term 'effective age' differs from 'chronological age' because:
AThey are synonyms in appraisal practice
BEffective age reflects the property's actual condition and remaining economic life, which may be more or less than its actual calendar age✓ Correct
CEffective age is only used for commercial properties
DChronological age is used for income properties and effective age for residential only
Explanation
Effective age is the age reflected by the condition and utility of the structure. A well-maintained 40-year-old home may have an effective age of 20; a neglected 10-year-old home may have an effective age of 25.
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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.
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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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