Property Valuation
A Utah property is being valued using the cost approach. The land is valued at $80,000. The replacement cost of the improvements is $320,000. Total accrued depreciation is $60,000. What is the indicated value?
A$340,000✓ Correct
B$260,000
C$400,000
D$320,000
Explanation
Cost approach value = Land value + (Replacement cost − Accrued depreciation) = $80,000 + ($320,000 − $60,000) = $80,000 + $260,000 = $340,000.
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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.
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.
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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