California Real Estate Practice Exam

If an appraiser were called upon to evaluate a public building with unique and distinctive architecture, which method of valuation would he use?

1. Comparison

2. Capitalization

3. None of the above

4. Replacement (cost approach)

The correct answer is: Comparison

When tasked with evaluating a public building that features unique and distinctive architecture, the most appropriate method of valuation would be the replacement, or cost approach. This method is particularly effective for properties that do not have comparable sales because their unique characteristics can make it difficult to find similar properties for a comparative analysis. The replacement cost approach focuses on determining the cost to replace the building with one of similar utility and function, while accounting for factors such as materials, labor, and current construction costs. This method is ideal for properties like the one described, as it allows the appraiser to assess the value based on the cost required to construct a similar structure, rather than relying solely on market comparisons or capitalization of income, which may not be applicable due to the building's distinctive nature. The comparison method would typically use recent sales of similar properties to determine the value, but unique buildings often lack sufficient comparable sales data. Capitalization involves assessing potential income generated by the property, which may not apply to a public building, especially one known for its architectural uniqueness. Thus, selecting the replacement cost approach aligns perfectly with the requirements of valuing such a distinctive property.