Cost Approach & Depreciation Analysis Flashcards
7 cards from real IACP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Cost Approach & Depreciation Analysis flashcards as text
In the cost approach to appraisal, what does 'reproduction cost' refer to?
Answer: The cost to construct an exact replica of the subject improvement using the same materials and methods
Reproduction cost is the cost to create an exact duplicate of the subject structure using the same materials, design, and construction methods as the original.
Which type of depreciation arises from deficiencies or superadequacies within the property itself that reduce its value?
Answer: Functional obsolescence
Functional obsolescence results from internal property deficiencies (inadequate floor plan, outdated systems) or superadequacies (over-improvements) that reduce market value.
An appraiser estimates a building's effective age at 15 years and its total economic life at 60 years. Using the age-life method, what is the accrued depreciation percentage?
Answer: 25%
Accrued depreciation using the age-life method = Effective Age ÷ Total Economic Life = 15 ÷ 60 = 25%.
Which cost estimating method uses published cost-per-square-foot data to estimate the replacement cost of improvements?
Answer: Comparative unit method
The comparative unit method (also called the square foot method) applies a cost per unit of area derived from comparable buildings to estimate total replacement cost.
External (economic) obsolescence differs from functional obsolescence primarily because it is:
Answer: Caused by factors outside the property such as neighborhood decline or zoning changes
External obsolescence stems from forces outside the property boundaries — such as adverse neighborhood trends, proximity to nuisances, or unfavorable market conditions — making it typically incurable.
In the cost approach, 'site value' is estimated as if the land were:
Answer: Vacant and available for its highest and best use
The site is valued as though it were vacant and available to be put to its highest and best use, separate from any existing improvements.
Which of the following best describes 'physical deterioration' that is considered curable?
Answer: Deferred maintenance items like peeling paint that are cost-effective to repair
Curable physical deterioration consists of deferred maintenance items where the cost to cure is less than or equal to the value added by the repair, making correction economically justified.