IACP Cost Approach & Depreciation Analysis 3

Question 1

A superadequacy in a property is best described as:

Accepted Answer

An over-improvement whose cost exceeds the value it contributes to the property

Answer

A superadequacy is an excess feature — such as an oversize HVAC system or elaborate elevator in a small building — whose cost exceeds its contribution to market value, creating incurable functional obsolescence.

Question 2

Which of the following is the correct formula for the cost approach to value?

Accepted Answer

Land Value + Reproduction/Replacement Cost New – Accrued Depreciation

Answer

The cost approach formula is: Value = Land Value + Cost New of Improvements – Accrued Depreciation, combining the separately estimated land value with depreciated improvement value.

Question 3

Observed condition depreciation (also called the observed condition method) requires the appraiser to:

Accepted Answer

Physically inspect and rate each component of the building to estimate depreciation directly

Answer

The observed condition method requires direct physical inspection of every building component, allowing the appraiser to assign depreciation based on actual observed conditions rather than age-based formulas.

Question 4

Market extraction is used in the cost approach primarily to:

Accepted Answer

Derive depreciation estimates from analysis of comparable improved property sales

Answer

Market extraction derives total accrued depreciation from market sales of improved properties by subtracting the estimated land value and cost new from the sales prices of comparable properties.

Question 5

Which of the following would be classified as external (economic) obsolescence affecting a residential property?

Accepted Answer

A new industrial facility constructed adjacent to the neighborhood

Answer

An adjacent industrial facility is an external negative influence outside the property that reduces its value, making it a classic example of external (economic) obsolescence.

(IACP) Independent Appraisers Certification Program Practice Test

(IACP) Independent Appraisers Certification Program Practice Test

IACP Cost Approach & Depreciation Analysis 3