Chapter 3 of 148% of exam
Valuation and Market Analysis
Valuation estimates property worth using recognized approaches and economic principles. Licensees prepare market analyses to guide pricing.
Approaches to Value
The sales comparison approach analyzes recent sales of similar properties and suits residential homes. The cost approach estimates replacement cost minus depreciation plus land value and suits new or special-purpose buildings. The income approach capitalizes net operating income for investment property.
Making Adjustments
In the sales comparison approach, adjustments are always made to the comparable properties, never the subject. A superior feature in the comparable is adjusted downward, and an inferior feature is adjusted upward. Reconciliation weighs the indicated values to reach a final opinion.