California Real Estate Practice Exam

Which approach to valuation estimates land and building value separately?

1. Market approach

2. Income approach

3. Cost approach

4. Comparative approach

The correct answer is: Cost approach

The cost approach is a commonly used method to estimate the value of a property, where land and building value are considered separately. This approach calculates the total cost of replacing the property, taking into account the current market rates for the land and building materials. The market approach and comparative approach both rely on recent sales of similar properties, and do not break down the value into land and building components. The income approach is based on the expected income the property will generate, and does not consider land and building value separately. Therefore, the cost approach is the best option for estimating land and building value separately.