When a cost service's figures are used, the appraiser should verify that the quoted base includes or excludes:
Correct Answer
C) Items such as site work, contractor overhead and profit
Why this is correct: Items such as site work, contractor overhead and profit. The governing concept is that cost services differ in what is included in their base cost figures. Verifying inclusions prevents double-counting or omission, which can cause significant valuation errors. Why the other choices are wrong: The names of the subcontractors used on comparable projects is irrelevant to the cost basis. The property's assessed value for the current tax year is not part of cost service verification. The buyer's anticipated financing costs at purchase are not included in reproduction or replacement cost. Exam tip: Always check the cost service manual's inclusions page to know exactly what is in the base cost figure before applying adjustments.
Why This Is the Correct Answer
Why this is correct: Items such as site work, contractor overhead and profit. The governing concept is that cost services differ in what is included in their base cost figures. Verifying inclusions prevents double-counting or omission, which can cause significant valuation errors. Why the other choices are wrong: The names of the subcontractors used on comparable projects is irrelevant to the cost basis. The property's assessed value for the current tax year is not part of cost service verification. The buyer's anticipated financing costs at purchase are not included in reproduction or replacement cost. Exam tip: Always check the cost service manual's inclusions page to know exactly what is in the base cost figure before applying adjustments.
More Cost Approach Questions
In a cost approach for a proposed building, the appropriate cost basis is generally:
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