An appraiser is valuing a unique heritage building with no recent comparable sales. The building generates $180,000 annual NOI, but replacement cost is $3.2M with $800,000 in accrued depreciation. Which approach should receive primary weight in the final valuation?
Correct Answer
A) Income approach as it reflects the property's economic value
For income-producing properties with limited comparable sales, the income approach typically receives primary weight because it directly reflects the property's ability to generate economic returns. The cost approach may not reflect market preferences for heritage properties, and comparison approach is limited without adequate comparables.
Why This Is the Correct Answer
The income approach is most appropriate for this unique heritage building because it directly measures the property's economic value through its income-generating capacity. With $180,000 annual NOI, this approach reflects what investors are willing to pay based on actual returns. When comparable sales are limited and the property has unique characteristics that may not align with replacement costs, the income approach provides the most reliable indication of market value for income-producing properties.
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An appraiser is valuing a unique heritage building with no recent comparable sales. The building generates rental income but also has significant historical restrictions on modifications. Which combination of approaches would be most appropriate?
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An appraiser is valuing a unique heritage property with no recent comparable sales. The replacement cost is estimated at $800,000, land value is $200,000, and total depreciation is calculated at $150,000. What is the indicated value using the cost approach?