Property Valuation
What is the principle of anticipation in real estate valuation?
AAnticipating market downturns
BValue is created by expected future benefits; properties are worth the present value of anticipated future income/use✓ Correct
CExpecting appreciation in rapidly growing markets
DA principle about property age and value
Explanation
The principle of anticipation states that value is based on the expectation of future benefits. Buyers pay for what a property will provide in the future, not just what it has produced in the past.
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Key Terms to Know
Appraisal
A 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.
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.
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