A building in Wilmington, NC has a replacement cost of $420,000 and has depreciated 25%. The lot is worth $85,000. What is the indicated value via the cost approach?
Why $400,000 Is Correct
Answer B: $400,000
Exam Tip: Real Estate Math
Math questions are formula-based. Memorize the key formulas: commission splits, proration, cap rate (NOI ÷ Value), GRM (Price ÷ Gross Rent), and LTV (Loan ÷ Value). Practice converting between annual and monthly figures.
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Key Terms to Know
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
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.
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