CFA Practice Question

There are 139 practice questions for this study session.

CFA Practice Question

A major disadvantage of relying solely on the comparative sales approach of valuing real estate is that the approach:
A. Works well only for relatively new properties.
B. Requires estimating a market capitalization rate.
C. Does not reflect the fact that each property is unique.
Explanation: Although all properties are separate and unique, the comparative sales approach uses recent selling prices of comparable properties to estimate the market value of the subject property. Using the comparative sales approach depends on finding other properties that have sold recently and are usually in close physical proximity to the property being valued. The approach does not require estimating the incomes from comparable properties or using the capitalization rate.

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