RAA RAA Cost Approach & Depreciation 2

Question 1

In the age-life method of estimating depreciation, what does 'effective age' represent?

Accepted Answer

The age the building appears to be based on its condition and utility

Answer

Effective age reflects the apparent age of the property given its condition and maintenance, which may differ from chronological age.

Question 2

Using the age-life method, if a home has an effective age of 10 years and a total economic life of 60 years, the depreciation percentage is:

Accepted Answer

16.67%

Answer

Depreciation % = Effective Age ÷ Total Economic Life = 10 ÷ 60 = 16.67%.

Question 3

Which depreciation method provides the most detailed estimate by itemizing each component's condition and remaining life?

Accepted Answer

Observed Condition (Breakdown) Method

Answer

The Observed Condition (Breakdown) Method analyzes each component separately, measuring physical, functional, and external depreciation individually.

Question 4

A single-family home has replacement cost new of $250,000 and total accrued depreciation of $50,000. The site value is $75,000. What is the indicated value by the cost approach?

Accepted Answer

$275,000

Answer

Cost approach value = ($250,000 − $50,000) + $75,000 = $275,000.

Question 5

The cost approach is given the most weight by an RAA appraiser when:

Accepted Answer

The property is new construction or has few sales comparables

Answer

The cost approach is most reliable and receives the most weight for new construction or unique properties where comparable sales are scarce.

(RAA) Certified Residential Accredited Appraiser Practice Test

(RAA) Certified Residential Accredited Appraiser Practice Test

RAA RAA Cost Approach & Depreciation 2