Quiz 7: Valuation Using the Sales Comparison and Cost Approaches

Business

The theoretical basis of the Sales Comparison Approach is the concept that willing buyers and sellers in a free market will use sales prices of comparable properties recently sold to determine what the market price is. This approach has the additional advantage of being easily understood by buyers and seller who can follow the valuation procedures.

The final price for each comparable reached after all adjustments have been made is termed the "final adjusted sales price". Therefore the answer is b Final adjusted sale price

The Cost Approach compares the building with the cost building of a brand new building and then estimate the accrued depreciation of the building to arrive at a value for the older property. There are numerous problems with using this method for older buildings. The design and layout of the older building may be functionally obsolete. It is very difficult to estimate accrued depreciation as there are numerous assumptions made to make that estimation.