Mortgage Loan Originator (MLO) Licensing Practice Test

The cost approach is particularly suitable for appraising a school because it emphasizes the value of the property based on the cost to replace or reproduce it, minus any depreciation. Schools are unique properties that often have specific purposes that might not translate well to market comparisons or income generation, making this method more logical.

In the cost approach, the appraiser calculates the current cost to construct the school while also considering the current value of the land. This approach is beneficial when dealing with specialized properties like schools, which do not often have a direct comparable sale in the market. The ability to accurately assess construction costs and the potential for any necessary adjustments for depreciation makes the cost approach a strong choice.

Other appraisal approaches might not capture the unique aspects of school properties effectively. For example, the income approach, which typically evaluates property based on its ability to generate income, is less relevant for school properties that are publicly funded and not operated for profit. The sales comparison approach may face challenges due to a lack of direct comparisons with similar educational facilities in the area. The market approach is not commonly used as it focuses on pricing based on comparable sales, which may not be readily available for schools.