SAEE - Cost Approach and Depreciation Questions and Answers

Question 1

An appraiser is valuing a historic property with unique, ornate plasterwork that is no longer commonly used.
To accurately estimate the cost of the improvements, which method would be most appropriate?

Accepted Answer

Reproduction cost, because it estimates the cost to create an exact duplicate using the same materials and standards.

Answer

Replacement cost, because it measures the cost to build a structure with the same utility.

Answer

The unit-in-place method, as it focuses only on the cost of modern, equivalent components.

Answer

The square foot method, as it provides a general cost based on the property's size.

Question 2

A residential property is located next to a newly constructed factory that creates significant noise and pollution. The property itself is well-maintained and has a modern layout. Which type of depreciation is most evident in this scenario?

Accepted Answer

Economic Obsolescence

Answer

Physical Deterioration

Answer

Functional Obsolescence

Answer

Curable Depreciation

Question 3

An appraiser is using the age-life method to calculate depreciation. The improvement's replacement cost is $500,000. The appraiser determines the effective age is 15 years and the total economic life is 60 years. What is the amount of accrued depreciation?

Accepted Answer

$125,000

Answer

$100,000

Answer

$150,000

Answer

$375,000

Question 4

Which of the following describes the fundamental formula for the Cost Approach to valuation?

Accepted Answer

(Replacement Cost New - Accrued Depreciation) + Land Value

Answer

Market Value of Comparables - Adjustments + Land Value

Answer

Net Operating Income / Capitalization Rate

Answer

Gross Rent Multiplier x Annual Rental Income

Question 5

A 30-year-old building has been impeccably maintained and recently modernized with a new kitchen and updated systems, making it appear and function like a 10-year-old building. In the context of depreciation, what does the '10-year' figure represent?

Accepted Answer

Effective Age

Answer

Actual Age

Answer

Chronological Age

Answer

Total Economic Life

Question 6

Which of the following is an example of 'curable' functional obsolescence?

Accepted Answer

A house has an outdated kitchen that could be remodeled, and the cost to do so would be less than the resulting increase in value.

Answer

A home's foundation has a major, irreparable crack.

Answer

The primary employer in a small town closes, causing widespread value decline.

Answer

A new highway is built directly behind the property, creating constant noise.

An appraiser is valuing a historic property with unique, ornate plasterwork that is no longer commonly used.To accurately estimate the cost of the improvements, which method would be most appropriate?

An appraiser is valuing a historic property with unique, ornate plasterwork that is no longer commonly used.
To accurately estimate the cost of the improvements, which method would be most appropriate?