Certified Residential Appraiser Practice Exam

Which method is NOT a technique used in the Cost Approach?

1. Comparative Unit Method

2. Income Capitalization Method

3. Unit in Place Method

4. Quantity Survey Method

The correct answer is: Income Capitalization Method

The Income Capitalization Method is not a technique used in the Cost Approach, which focuses on determining the value of a property based on the cost of constructing a similar property, adjusted for depreciation. The Cost Approach typically includes methods that directly calculate the costs associated with building a property and estimating the value based on those calculations. The Comparative Unit Method, Unit in Place Method, and Quantity Survey Method all pertain to the estimation of construction costs. The Comparative Unit Method estimates cost per unit of measurement (like square footage), the Unit in Place Method calculates the cost of individual components or systems within the property, and the Quantity Survey Method involves a detailed analysis of all materials and labor required for construction. These methods emphasize the costs associated with creating or replacing a property, while the Income Capitalization Method is focused on deriving value based on the income generated by a property, which is more aligned with the Income Approach to appraisal rather than the Cost Approach.