Valuation & appraisal
⏱ ~3-min readAceMark Guide
What this topic is really about
The sales comparison approach estimates a property's market value by comparing it to recently sold, similar properties in the same geographic area. Distractors like construction cost are incorrect because they refer to the cost approach, which is a separate valuation method typically used for unique or new buildings.
A comparative market analysis (CMA) is an informal estimate of market value prepared by a real estate agent to help clients determine listing or offering prices. In contrast, formal appraisals must be performed by licensed appraisers, and county assessors determine value strictly for property tax purposes.
See the mechanism
The income approach estimates a property's value based on the net income it generates, making it ideal for commercial properties and apartment buildings. A diagram for this topic isn't available yet — the worked example below walks the same reasoning step by step.
An exam-style question, fully explained
The income approach to appraisal is most appropriate for:
- Identify what the question tests: The income approach to appraisal is most appropriate for:.
- The income approach estimates a property's value based on the net income it generates, making it ideal for commercial properties and apartment buildings.
- It is not used for single-family homes, which are typically valued using the sales comparison approach based on recent market sales.
Traps the examiner sets
- Distractors like construction cost are incorrect because they refer to the cost approach, which is a separate valuation method typically used for unique or new buildings.
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