Certified Residential Appraiser Practice Exam

In which cost estimating method are adjustments made for indirect costs based on comparable buildings?

1. Unit-in-place method

2. Index method

3. Comparative unit method

4. Quantity survey method

The correct answer is: Comparative unit method

The comparative unit method is a cost estimating approach that uses data from recently completed comparable buildings to make adjustments for indirect costs. This method relies on a per-unit cost basis that takes into account the various features and characteristics of comparable properties, enabling appraisers to estimate the costs associated with the property in question more accurately. In this method, the appraiser analyzes the costs associated with similar properties, including direct costs such as materials and labor, and then applies adjustments for indirect costs such as overhead and profit based on the specifics of the new property. By using a comparative analysis, this method allows for a more tailored estimation that reflects the market conditions and cost structures observed in similar properties, making it particularly useful in residential appraisals. Other methods mentioned, such as the unit-in-place, index, and quantity survey methods, have different approaches and applications for estimating costs. For instance, the unit-in-place method calculates costs based on the specific installed cost of materials and labor for particular components of the building, while the quantity survey method involves a more detailed, itemized analysis of all costs associated with the construction. The index method utilizes a broad economic index to adjust costs over time rather than relying on specific comparable properties, making it less precise for individual appraisals focused