Which appraisal approach is most appropriate for valuing a newly constructed single-family home in a subdivision with limited sales data?
Correct Answer
B) Cost approach
The cost approach is most suitable for new construction when comparable sales are limited. This method calculates the value by adding the land value to the current cost of constructing the improvements, minus any depreciation.
Why This Is the Correct Answer
The cost approach is most appropriate for new construction when comparable sales data is limited. This method calculates property value by determining current land value and adding the cost to construct the improvements, minus any depreciation. For newly built homes, depreciation is minimal, making this approach highly reliable. Canadian appraisal standards recognize the cost approach as the primary method for new construction valuation, especially when market data is insufficient for meaningful comparison analysis.
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In Ontario, what is the key difference between an appraisal and a Comparative Market Analysis (CMA)?
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When valuing a strata property in BC, which unique factor must be considered that doesn't apply to freehold properties?
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An appraiser must value a special-purpose building in British Columbia, such as a municipal fire hall, that has no comparable sales and produces no rental income. Which approach is usually most appropriate?