SAEE Cost Approach and Depreciation 3

Question 1

Accrued depreciation in the cost approach is best defined as:

Accepted Answer

The total loss in value from all causes as of the appraisal date

Answer

Accrued depreciation is the difference between cost new and current value, reflecting all losses to date.

Question 2

The three major categories of depreciation recognized in appraisal are:

Accepted Answer

Physical, functional, and external

Answer

Depreciation is categorized as physical deterioration, functional obsolescence, and external obsolescence.

Question 3

A worn-out roof that can be economically repaired is an example of:

Accepted Answer

Curable physical deterioration

Answer

A roof that is cost-effective to replace represents curable physical deterioration.

Question 4

Depreciation is considered 'incurable' when:

Accepted Answer

The cost to cure exceeds the value added

Answer

An item is incurable when the cost to correct it is greater than the value it would add.

Question 5

A four-bedroom house with only one bathroom suffers primarily from:

Accepted Answer

Functional obsolescence

Answer

An inadequate or outdated layout such as too few bathrooms is functional obsolescence.

SAEE Test Practice Test