Valuation and Financing Practice Question

Question

A property manager is preparing a written response involving cost approach. The parties need a practical answer before moving forward. Which answer best applies the rule? (Item 24)

Answer choices

1. A. It is optional whenever both parties verbally agree to proceed.
2. B. It allows a salesperson to act independently of the responsible broker.
3. C. It shifts all responsibility to escrow and eliminates the broker’s duties.
4. D. Use replacement cost minus depreciation plus land value.

Correct Answer

D. Use replacement cost minus depreciation plus land value.

Explanation

The correct answer is D because cost approach requires candidates to use replacement cost minus depreciation plus land value. The other options overstate the effect of custom, oral agreement, escrow, or independent salesperson action and do not reflect safe California exam practice.

Question details

• Difficulty: medium
• Domain: Valuation and Financing
• Objective: cost approach

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