Which approach to valuation would be most appropriate for a newly constructed custom home in a neighborhood with few comparable sales?
Correct Answer
B) Cost approach as primary method
The cost approach is most reliable for new construction when comparable sales are limited because construction costs are known and depreciation is minimal. This approach provides the most accurate valuation when market data is insufficient for meaningful comparison analysis.
Why This Is the Correct Answer
The cost approach is most appropriate for newly constructed custom homes when comparable sales are limited because construction costs are readily available and accurate. With minimal depreciation on new construction, the replacement cost closely reflects market value. When few comparable sales exist, the cost approach provides the most reliable valuation method since it's based on actual construction expenses rather than insufficient market data.
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