Valuation and Financing Practice Question

Question

A listing agent notices a potential compliance issue involving cost approach. The parties need a practical answer before moving forward. Which answer best applies the rule? (Item 104)

Answer choices

1. A. It requires the licensee to favor the other party over the licensee’s own client.
2. B. It is primarily a tax rule with no effect on brokerage practice.
3. C. It removes the need for written disclosure if the licensee believes the client already knows.
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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