Property Valuation
A Virginia appraiser uses the cost approach for a historic property in Richmond. Reproduction cost refers to:
AThe cost to build a similar but updated structure
BThe cost to replicate the exact structure using the same materials and methods✓ Correct
CThe cost if built using modern construction techniques
DThe current market value of the structure
Explanation
Reproduction cost is the cost to construct an exact replica of the subject property using the same materials, construction methods, and quality. Replacement cost uses modern materials and methods to provide similar utility.
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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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