Property Valuation
Which approach is most reliable for appraising a new single-family home in a suburban Salt Lake County subdivision with many similar recent sales?
AThe cost approach, because the home is new
BThe sales comparison approach, using recent sales of similar homes✓ Correct
CThe income approach, based on rental rates
DAll approaches are equally reliable for new homes
Explanation
For new homes in active subdivisions with comparable recent sales, the sales comparison approach is most reliable. The cost approach is also considered (and may be close for new construction), but market-based comparable sales best reflect what buyers are paying.
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Key Terms to Know
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.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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