Property Valuation
The sales comparison approach to value requires the appraiser to:
ACalculate the cost to replace the building
BFind and adjust comparable properties that have recently sold near the subject property✓ Correct
CCalculate the net operating income and apply a capitalization rate
DDetermine the value of the land separately from the improvements
Explanation
The sales comparison approach involves finding recently sold comparable properties (comps) and making dollar adjustments for differences between the comps and the subject property to estimate value.
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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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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