Property Valuation
In Ohio, when appraising new construction, the cost approach is often most reliable because:
ANew homes depreciate rapidly, making income approach more reliable
BNew construction has little or no depreciation, so cost closely mirrors market value✓ Correct
CNew construction has no comparable sales
DNew homes always appraise at exactly the construction cost
Explanation
For newly constructed properties with minimal depreciation, the cost approach closely reflects market value because little adjustment for physical deterioration or obsolescence is needed.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
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.
Math Concepts
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