Certified Relocation Professional (CRP) Practice Exam

The ERC appraisal report emphasizes the use of which approach for valuation?

1. Sales comparison analysis and highest and best use valuation

2. Sales comparison analysis and cost approach

3. Sales comparison analysis excluding the cost approach

4. Sales comparison analysis, cost approach, and income approach

The correct answer is: Sales comparison analysis excluding the cost approach

The correct answer is that the ERC appraisal report emphasizes the use of sales comparison analysis, excluding the cost approach. The sales comparison approach is a widely accepted method in real estate valuation, especially for residential properties. It involves comparing a subject property to similar properties that have recently sold in the same area to determine its market value. In the context of relocation and appraisal reporting, the sales comparison approach provides a clear and effective means of gauging the property's current market value based on actual sales transactions, which can be more reflective of the market conditions than the cost approach. The cost approach, which estimates the value based on the cost to reproduce or replace the property minus depreciation, may not as accurately represent the market dynamics for relocation purposes, particularly in fluctuating markets. The exclusion of the cost approach aligns with the reporting objectives of the ERC, which aims for relevance and practicality in evaluating properties for relocation. This focus on recent comparable sales helps ensure that the valuation is grounded in real market transactions, making it a more reliable indicator for the needs of parties involved in the relocation process.