An appraiser in Miami is using the cost approach to value a 5-year-old commercial building. The replacement cost new is $2,500,000, the land value is $800,000, and the total depreciation is estimated at $375,000. What is the indicated value using the cost approach?
Correct Answer
C) $2,925,000
Using the cost approach formula: Land Value + (Replacement Cost New - Depreciation) = $800,000 + ($2,500,000 - $375,000) = $800,000 + $2,125,000 = $2,925,000. Option A incorrectly subtracts land value instead of adding it. Option B fails to include the land value in the final calculation. Option D incorrectly adds depreciation instead of subtracting it.
Why This Is the Correct Answer
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Related Topics & Key Terms
Key Terms:
Related Concepts
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
A transfer tax is a tax imposed on the transfer of ownership of real estate.
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
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A Florida appraiser is valuing a 15-year-old single-family home in a well-established neighborhood with many recent comparable sales. The property is owner-occupied and well-maintained. Which appraisal approach would typically be given the most weight in determining the final value estimate?
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A Florida appraiser is valuing a unique waterfront mansion in Palm Beach with no recent comparable sales. The property generates rental income of $25,000 per month and has historical significance. Which combination of appraisal approaches would be most appropriate for this assignment?