In appraising a special purpose property with few sales and no rental market, which approach usually carries most weight?
Correct Answer
C) The cost approach less accrued depreciation
Why this is correct: For a special-purpose property with no active sales or rental market, the sales comparison and income approaches lack reliable data. The cost approach, estimating the cost to construct a substitute property less depreciation, becomes the primary, and often only, supportable method. Why the other choices are wrong: The sales comparison and income approaches cannot be reliably developed without market data. An average of approaches is not appropriate when some approaches are unsupported. Exam tip: When sales and income data are absent, the cost approach is the default, but depreciation estimation is critical.
Why This Is the Correct Answer
Why this is correct: For a special-purpose property with no active sales or rental market, the sales comparison and income approaches lack reliable data. The cost approach, estimating the cost to construct a substitute property less depreciation, becomes the primary, and often only, supportable method. Why the other choices are wrong: The sales comparison and income approaches cannot be reliably developed without market data. An average of approaches is not appropriate when some approaches are unsupported. Exam tip: When sales and income data are absent, the cost approach is the default, but depreciation estimation is critical.
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