Property Valuation
In South Dakota, 'effective age' of a building differs from 'actual age' because effective age reflects:
AThe year construction began rather than was completed
BThe condition and utility of the building relative to similar structures✓ Correct
CThe age stated on the building permit
DThe number of years since the last major renovation only
Explanation
Effective age is the appraiser's estimate of the building's age based on its observed condition and utility, which may be less than actual age if well-maintained or more if poorly maintained.
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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.
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.
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