When using the cost approach for a California property, all of the following are deducted from the replacement cost new to arrive at the depreciated improvement value EXCEPT:
Correct Answer
A) The land value as estimated by comparable vacant land sales
Land value is NOT deducted from the replacement cost new. In the cost approach, the formula is: Property Value = (Replacement Cost New - Total Depreciation) + Land Value. Land value is ADDED to the depreciated improvement value, not subtracted from the replacement cost. Land does not depreciate and is valued separately.
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Related Topics & Key Terms
Key Terms:
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Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
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Previous Question
A California appraiser is estimating land value as part of the cost approach for a residential property in the Silicon Valley. The appraiser finds that comparable vacant lot sales in the area are extremely rare because virtually all land has been developed. Which alternative method of land valuation is MOST appropriate?
Next Question
A California appraiser is valuing a property that has both an ADU (Accessory Dwelling Unit) and a JADU (Junior Accessory Dwelling Unit) built under California's recent ADU legislation. Using the cost approach, how should the appraiser handle these additional units?