Property Valuation
The cost approach to value would be most reliable for which type of property?
AAn apartment complex with 50 units
BA new elementary school✓ Correct
CA 40-year-old single-family home
DA vacant lot in a residential subdivision
Explanation
The cost approach is most reliable for special-purpose properties (schools, churches, government buildings) and new construction, where comparable sales and income data are limited.
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Key Terms to Know
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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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