Illinois Real Estate Practice Exam

What is the recommended approach for valuing a mansion to be converted into individual condo units?

1. Income Approach

2. Cost Approach

3. Reproduction Cost Approach

4. Sales Comparison Approach

The correct answer is: Sales Comparison Approach

The recommended approach for valuing a mansion that is being converted into individual condo units is the Sales Comparison Approach. This method involves looking at recent sales of similar properties, typically condo units or other comparable residential properties, to establish a value based on market activity. It is particularly effective in assessing properties that are being adapted for a different use, such as converting a single-family mansion into multiple condominiums, as it reflects current market conditions and buyer behaviors. Using the Sales Comparison Approach provides a clear insight into what buyers are willing to pay for comparable units in the adjusted market. It allows for adjustments based on differences in features, location, and condition between the subject property and the comparable sales, ensuring a market-driven valuation. In contrast, while other approaches may have their utility in different contexts, they may not effectively account for the nuances of the market for individual condo units. For instance, the Income Approach primarily focuses on properties that generate rental income, which may not apply directly if the conversion is not yet producing income. The Cost Approach emphasizes the cost to construct or replace the property, which may not align with actual market demand for the individual units post-conversion. The Reproduction Cost Approach, while useful in certain cases, also might not reflect the realities of