CFA Practice Question

CFA Practice Question

When valuing real estate, ______ should rarely be used exclusively as an approach to value.
A. the comparative sales approach
B. the income approach
C. the cost approach
Explanation: The cost approach works best with new or relatively new properties and is a good method to use as a check of the other approaches to value.

User Contributed Comments 5

User Comment
danlan Majority are old properties?
pjdeschenes I wouldn't use comp sales alone. What if everything has been sold recently at inflate rates?
CFunder If you compare this with the valuation of a company you usually a DCF and back up with comparative ratio approach....not sure why this is different.
rubin1 check the word rarely
GBolt93 A is commonly used exclusively (residential real estate)
B is also used frequently for commercial property.
Cost is really only used as a check since you never pay more than cost to rebuild.
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