California Real Estate Practice Exam

A separate estimate of the land value is essential in which appraisal approach?

1. Income approach

2. Market data approach

3. Cost approach

4. Comparative approach

The correct answer is: Cost approach

In an appraisal, each approach has its own importance in evaluating the value of a property. In the income approach, the focus is on the potential income that can be generated by the property. In the market data approach, comparable properties are used to determine the value. In the comparative approach, recent sales of similar properties are analyzed to determine the value. The cost approach, on the other hand, focuses on the costs associated with building the property and the value of the land. Therefore, a separate estimate of the land value is necessary in the cost approach. Without this estimate, the value of the land may not be accurately reflected in the overall appraisal. The other options may also be used in an appraisal, but they do not require a separate estimate of the land value to be conducted.