CAE Property Valuation Techniques 2

Question 1

In the cost approach, functional obsolescence is considered curable when:

Accepted Answer

The cost to cure is equal to or less than the value added by the cure

Answer

A defect is economically curable when fixing it adds at least as much value as it costs.

Question 2

A home near a newly built highway interchange loses value from traffic noise. What type of depreciation is this?

Accepted Answer

External (economic) obsolescence

Answer

Loss from factors outside the property boundaries is external obsolescence and is generally incurable by the owner.

Question 3

Which cost estimate uses modern materials and design to build a structure with the same utility as the subject?

Accepted Answer

Replacement cost

Answer

Replacement cost builds equal utility with current materials and standards, while reproduction cost builds an exact replica.

Question 4

A 30-year-old house has been extensively renovated and shows the condition and utility of a 15-year-old house. Its 15-year figure is called its:

Accepted Answer

Effective age

Answer

Effective age reflects the property's condition and utility compared with similar properties, not its actual years since construction.

Question 5

Using the age-life method, a building with an effective age of 12 years and a total economic life of 60 years has what percentage of depreciation?

Accepted Answer

20%

Answer

Depreciation equals effective age divided by total economic life, so 12 ÷ 60 = 20%.

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