IACP Cost Approach & Depreciation Analysis

Question 1

In the cost approach to appraisal, what does 'reproduction cost' refer to?

Accepted Answer

The cost to construct an exact replica of the subject improvement using the same materials and methods

Answer

The cost to build a functionally equivalent substitute structure using modern materials

Answer

The depreciated value of the existing structure as of the appraisal date

Answer

The cost of land plus all site improvements at today's prices

Question 2

Which type of depreciation arises from deficiencies or superadequacies within the property itself that reduce its value?

Accepted Answer

Functional obsolescence

Answer

External obsolescence

Answer

Physical deterioration

Answer

Economic obsolescence

Question 3

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?

Accepted Answer

25%

Answer

20%

Answer

15%

Answer

30%

Question 4

Which cost estimating method uses published cost-per-square-foot data to estimate the replacement cost of improvements?

Accepted Answer

Comparative unit method

Answer

Quantity survey method

Answer

Unit-in-place method

Answer

Index method

Question 5

External (economic) obsolescence differs from functional obsolescence primarily because it is:

Accepted Answer

Caused by factors outside the property such as neighborhood decline or zoning changes

Answer

Always curable and can be corrected at reasonable cost

Answer

Related only to physical wear and tear of structural components

Answer

Applicable solely to commercial and industrial properties

Question 6

In the cost approach, 'site value' is estimated as if the land were:

Accepted Answer

Vacant and available for its highest and best use

Answer

Improved with existing structures at their current condition

Answer

Purchased at its original acquisition price adjusted for inflation

Answer

Encumbered by all existing easements and restrictions

Question 7

Which of the following best describes 'physical deterioration' that is considered curable?

Accepted Answer

Deferred maintenance items like peeling paint that are cost-effective to repair

Answer

Foundation settling that requires complete demolition and reconstruction

Answer

Long-term structural damage that exceeds the building's remaining economic life

Answer

Neighborhood blight affecting the property's market appeal