New Jersey Real Estate License Exam Practice Question
A city has built a new library and has contacted the broker to list and sell the old library building. Which approach should the broker use to estimate the fair market value for the purpose of listing and selling this property?
Correct Answer: C
Rationale: Estimating the fair market value of the old library building requires a thorough understanding of its worth in relation to current market conditions.
The replacement cost approach is ideal here, as it assesses what it would cost to build a similar structure today, factoring in current construction costs and depreciation. This is particularly relevant for unique properties like libraries.
The income approach (A) is less suitable since it primarily focuses on properties generating rental income, which may not apply to the old library. The sales comparison method (B) relies on comparable sales, but may not adequately reflect the unique aspects of this property. The gross rent multiplier (D) is also inappropriate, as it is used for income-producing properties and does not apply to a building that is no longer in use.
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