IACP Cost Approach & Depreciation Analysis 2

Question 1

The quantity survey method of cost estimating is considered the most accurate because it:

Accepted Answer

Itemizes all materials, labor, overhead, and profit for every component of construction

Answer

The quantity survey method provides the highest level of detail by listing and pricing every material and labor item, making it the most accurate but most time-consuming cost approach method.

Question 2

When using the cost approach, an appraiser who estimates replacement cost rather than reproduction cost is accounting for:

Accepted Answer

Functional obsolescence already by substituting modern equivalent materials

Answer

Replacement cost uses modern materials and current standards, so some functional obsolescence (related to outdated construction techniques or materials) is inherently captured in the lower cost estimate.

Question 3

A building has a chronological age of 20 years but has been well maintained and updated. Its effective age is estimated at 12 years. This difference indicates:

Accepted Answer

The owner's capital improvements and upkeep have extended the building's economic life

Answer

When effective age is less than chronological age, it indicates that maintenance, renovations, or updates have kept the building in condition better than expected for its actual age.

Question 4

Which statement correctly describes 'incurable functional obsolescence' in the cost approach?

Accepted Answer

A deficiency where correction is either physically impossible or economically unwarranted

Answer

Incurable functional obsolescence refers to items that either cannot be corrected or where the cost to cure exceeds the resulting increase in value, making correction economically irrational.

Question 5

In the cost approach, entrepreneurial profit (developer's profit) is:

Accepted Answer

The return a developer expects for taking the risk of creating a new property

Answer

Entrepreneurial profit is the market-derived reward a developer expects for taking the risk, expertise, and time involved in creating a new property from concept to completion.

(IACP) Independent Appraisers Certification Program Practice Test

(IACP) Independent Appraisers Certification Program Practice Test

IACP Cost Approach & Depreciation Analysis 2