Idaho Real Estate Salesperson Exam — All Questions
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An appraiser is valuing a single-family home in an established neighborhood. Which approach to value will the appraiser rely on most heavily?
- a.Cost approach
- b.Income approach
- c.Sales comparison approach✓
- d.Gross rent multiplier approach
The sales comparison approach, which analyzes recent sales of similar nearby properties, is the most reliable and heavily weighted method for single-family residences because such homes are bought and sold frequently, giving plenty of comparable data. The cost approach is most useful for new or special-purpose buildings, and the income approach (and gross rent multiplier) apply to income-producing property, not owner-occupied homes.
The principle that a property's maximum value tends to be set by the cost of acquiring an equally desirable substitute property is known as:
- a.Progression
- b.Substitution✓
- c.Contribution
- d.Anticipation
The principle of substitution holds that an informed buyer will pay no more for a property than the cost of an equally desirable substitute; it is the foundation of the sales comparison approach. Progression is when a lower-value property gains value from higher-value neighbors. Contribution measures how much a specific component adds to total value. Anticipation is value based on expected future benefits.