Property Valuation
In the sales comparison approach, adjustments are made to the comparable sales to:
AIncrease the subject property's value
BAccount for differences between the comparable and the subject property✓ Correct
CMatch the listing price of the subject
DAdjust the cap rate
Explanation
Adjustments in the sales comparison approach compensate for differences between comparables and the subject. If a comp is superior to the subject, a negative adjustment is made.
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Key Terms to Know
Capitalization Rate (Cap Rate)
A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Math Concepts
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