Property Valuation
The 'principle of anticipation' in real estate value holds that:
AValue is determined by the cost to build the property today
BValue is based on the expectation of future benefits (income, use, or resale) from ownership✓ Correct
CValue declines as the property ages
DValue is based on what similar properties recently sold for
Explanation
The principle of anticipation states that value is created by the expectation of future benefits — income, appreciation, or utility. Buyers pay today based on what they expect to receive from the property in the future.
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Key Terms to Know
Comparable Sales (Comps)
Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
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