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

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.

Question 2

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

Accepted Answer

Functional obsolescence

Answer

Functional obsolescence results from internal property deficiencies (inadequate floor plan, outdated systems) or superadequacies (over-improvements) that reduce market value.

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

Accrued depreciation using the age-life method = Effective Age ÷ Total Economic Life = 15 ÷ 60 = 25%.

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

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.

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

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.

(IACP) Independent Appraisers Certification Program Practice Test

(IACP) Independent Appraisers Certification Program Practice Test

IACP Cost Approach & Depreciation Analysis