Appraisal - Cost Approach Flashcards
Termite damage
Physical deterioration
Depreciation: Age-Life Method
Effective Age/Total Economic Life
Quantitative Survey Method
estimate the cost of improvement; present the most time and greatest detail
Depreciation: Breakdown Method
一樣樣計
Physical deterioration + functional obsolescence + external obsolescence + cost to cure physical damage
Incurable Cost
Subtract the curable items from the Cost New
Depreciation
Curable + Incurable
Reproduction Cost
Exact replica including deficiency and super adequacy (any functional obsolesce depreciation must considered)
Replacement Cost
Functional Equivalent
Do not include depreciation and “as is” value of site improvement, just add up the cost!
Entrepreneurial Profi
The reward associates with the risk involved in a real estate project
Unit in Place
The method widely used by contractors that entails the cost addition of all major building component
Accrued depreciation
the difference between an improvement’s cost new and its contribution to market value as of the date of appraisal;
-Market Extraction - Age/Life - Breakdown
Value
Site Value + Reproduction Cost New Improvement
or
Estimated site value + Depreciated cost new
Straight-line depreciation
i.e. economic life = 80 years = 100%/80 = 1/80= 0.0125= 1.25% depreciation per year
Curable Item
The cost to cure is equal to or less than the contributory value. As long as the increase in contributory value is greater than the costs to replace, repair, or correct the problem, the problem is deemed curable
External Obsolescence
It is most often incurable
Deals with a loss in the building’s value
Replacement Cost
Methods
Comparative-Unit
Quantity Survey
Unit-In-Place
Cost Approach
Is most applicable for..
- special use properties
- when improvement are relatively new
- limited amount of accrued depreciation
Depreciation
Loss in value of the “as is” condition of the subject structure when compared to a new one
Determine Weight of Cost Approach
Scope of Work
Depreciation - Market Extraction
Most preferred
Depreciation - Physical Obsolescence
Modified Age/Life
Curable + Incurable vs. effective age
- Calculate Cost New
- Curable Cost (stated)
- Incurable Cost = (Cost New - Curable Cost ) x incurable depreciation rate (effective age/total economic life)
- Total Depreciation = Curable + Incurable Depreciation
- Total Deprecation % = Total Depreciation/Cost New
Cost Multiplier
multiply by replacement cost only, do not multiply by land cost
Direct Cost
Relate directly to the property itself in regards to CONSTRUCTION
Index Factor
Cost of building = Original cost x Index Factor
Fiscal Policy
The management of government receipts and expenditures
政府財政收入
Monetary Policy
Federal Reserve, interest rate
貨幣供應控制
Depreciation of Land
Land never depreciated! 0.00
Depreciation %
curable depreciation + incurable depreciation (derived from cost new - curable x )
Sf/$ scale
smaller in a larger place
Cost New
Improvement
Do not include depreciation
Curable Functional Depreciation
Cost to remove superadequect item - salvage cost + cost to insall
