Property Valuation
An appraiser is asked to provide an opinion of value for an unusual specialty property — a church — in Seattle. The most challenging aspect of this appraisal is typically:
ADetermining the replacement cost of the building
BFinding comparable sales data for a property type that rarely trades on the open market✓ Correct
CEstimating the income from pew rentals
DValuing the landscaping
Explanation
Specialty properties like churches, schools, and government buildings rarely sell on the open market, making sales comparison data very limited. Appraisers must typically rely primarily on the cost approach, with limited income and sales comparison data.
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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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