Property Valuation
Which of the following North Dakota properties would MOST likely be valued using the cost approach?
AA single-family home in a Fargo subdivision with many comparable sales
BA new elementary school in Grand Forks✓ Correct
CAn apartment complex in Bismarck
DA retail strip center in Minot
Explanation
The cost approach is most applicable to special-use properties (like schools, churches, and government buildings) that rarely sell and have no income stream, making the sales comparison and income approaches unreliable.
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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.
AppraisalA 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.
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