What valuation approach is typically most appropriate for a special purpose property (such as a church or school) in Alberta?
Correct Answer
C) Cost approach, as comparables are scarce and the property may produce no rent
Special purpose properties such as churches, schools, and government buildings are typically valued using the cost approach because there are few comparable sales in the market and they usually do not generate rental income. The cost approach estimates the cost to reproduce or replace the improvements, less depreciation, plus the land value.
Why This Is the Correct Answer
Under standard appraisal practice in Alberta, the cost approach is most appropriate for special purpose properties because comparable sales are rare and the properties generally do not produce rental income. The cost approach estimates replacement cost less depreciation plus land value. This is consistent with Alberta assessment methodology and is widely accepted by assessment review boards for these property types.
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