Origination ActivitiesQuestion 270 of 400
An appraisal uses the cost approach on a newer, unique home with few comparable sales. The cost approach estimates value by:
a.Averaging the last three listing prices
b.Capitalizing the property's rental income
c.Using only the borrower's opinion of value
d.Adding land value to the replacement cost of improvements, less depreciation
Explanation
The cost approach estimates value as the land value plus the current cost to replace the improvements, minus accrued depreciation. It is most useful for new or special-purpose properties with limited comparable sales. It is not based on listings, income capitalization, or borrower opinion.
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