Property Valuation Techniques Flashcards
6 cards from real CAE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Property Valuation Techniques flashcards as text
Which of the following is a key method used in the cost approach to valuation?
Answer: Depreciated replacement cost
The cost approach estimates the value of a property by determining the cost to replace or reproduce the structure, minus depreciation, plus land value.
What is the primary principle behind the sales comparison approach?
Answer: Substitution
The sales comparison approach is based on the principle of substitution, which suggests that a buyer will not pay more for a property than a similar one.
Which factor is NOT typically considered in the income approach to valuation?
Answer: Property taxes
The income approach is based on net operating income, capitalization rate, and market rent—not typically property taxes, which are part of operating expenses.
What does 'functional obsolescence' refer to in property valuation?
Answer: Outdated design or inefficiency
Functional obsolescence refers to a loss in value due to outdated design or features, making the property less desirable.
Which valuation method is most appropriate for income-producing properties?
Answer: Income approach
The income approach is most suitable for properties like apartment buildings and offices that generate rental income.
Which element most affects land value in the cost approach?
Answer: Location
Location is a key determinant of land value because it influences accessibility, demand, and desirability.