Florida Real Estate Sales Associate Examination Content OutlineReal Estate Property and OwnershipHard
An appraiser is valuing a unique, historic church property where there are no recent comparable sales and it does not generate income. Which appraisal approach would be considered the most reliable for estimating its value?
- ASales Comparison Approach
- BGross Rent Multiplier
- CCost Approach
- DIncome Capitalization Approach
Show answer & explanationAnswer & explanation
Correct answer: C. Cost Approach
The Cost Approach is often the most reliable method for appraising special-purpose properties (like churches, schools, or government buildings) for which there are few or no comparable sales and which do not generate income. It estimates the cost to replace or reproduce the improvements, subtracts depreciation, and adds the land value.
Why the other options are wrong
- A. Sales Comparison Approach is unsuitable due to a lack of comparable sales for unique properties.
- B. The Gross Rent Multiplier is a simplified income approach, unsuitable for non-income-producing properties.
- D. Income Capitalization Approach is unsuitable as the church does not generate income.
Cost Approach
An appraisal method that estimates the value of a property by calculating the cost to build a new replacement, subtracting depreciation, and adding the land value.
- Best for new construction and special-purpose properties.
- Relies on estimating replacement or reproduction cost.
- Requires accurate depreciation calculations.
Memory trick: Cost Approach for unique builds!