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02 Basic App Proc Quiz > Ch 6 Quiz > Flashcards

Ch 6 Quiz Flashcards

1
Q

Depreciation is defined as a loss in property value from

A

any cause

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2
Q

In most situations, which of these would be considered an example of a superadequacy?

A

gold-plated faucets, R-90 insulation in walls and ceilings, foundation walls that are 4 feet thick

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3
Q

A 10-­year-­old house will always have

A

physical deterioration

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4
Q

The difference between the cost of an improvement and its market value on the effective date of the appraisal is

A

depreciation

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5
Q

Depreciation is a loss in value from

A

Any cause

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6
Q

A home suffers functional obsolescence of $10,000 because it lacks a second bathroom, which could be installed at a cost of $9,500. This type of obsolescence is considered

A

curable

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7
Q

A building has a cost new of $400,000. Deferred maintenance items have been identified at a cost of $9,000. Short-­lived depreciation has been identified at $15,000; these short­-lived items have a total cost of $45,000. The building has an effective age of 20 years and a total economic life of 50 years. What is the amount of depreciation attributable to the long-­lived items?

A
  1. $400,000 - $9,000 - $45,000 = $346,000 (cost of long-lived items). 20 / 50 = 40% depreciation. $346,000 x 40% = $138,400.
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8
Q

A building has an effective age of 12 and a total economic life of 60 years. It cost $320,000 new and its site value is $95,000. What is the indicated value by cost approach?

A

351000

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9
Q

Which would NOT be a deferred maintenance item?

A

older roof showing some wear

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10
Q

Which of these is an example of deferred maintenance?

A

A broken window

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11
Q

“The period over which improvements to real estate contribute to property value” is the definition of _______________ life.

A

economic

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12
Q

A 10-year-old furnace with an expected life of 25 years will have experienced depreciation of:

A

40%. Age-Life Method. A 10-year-old furnace with an expected life of 25 years would have experienced depreciation of 40%. 10 divided by 25 is 0.40 or 40%.

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13
Q

The subject is a 15 year old duplex that would cost $240,000 to build new today. It is in good condition and you estimate the effective age to be 10 years. Your estimate of total economic life is 50 years. Its land value is $60,000. What is its value by the cost approach?

A
  1. Cost Approach Using Age- Life Method. 10 ÷ 50 = .20. $240,000 X .80 = $192,000. $192,000 + $60,000 = $252,000.
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14
Q

What type of depreciation would be caused by an old industrial facility located adjacent to a newer house?

A

External obsolescence

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15
Q

Which of these is NOT a cause of functional obsolescence?

A

deferred maintenance. The most common causes of functional obsolescence are layout problems, outmoded items, inadequacies, superadequacies, and atypical or unusual items.

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16
Q

True or False: Physical deterioration can be divided into three categories: deferred maintenance; short-lived components; and long-lived components.

A

TRUE.

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17
Q

What term is defined as “Items of wear and tear on a property that should be fixed now to protect the value or income- producing ability of the property”?

A

deferred maintenance. Deferred maintenance is defined as “needed repairs or replacement of items that should have taken place during the course of normal maintenance.”

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18
Q

The three general types of depreciation are:

A

Physical, functional, and external

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19
Q

True or False: External obsolescence can be shared between building and land.

A

TRUE

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20
Q

__________ will lose value over time just because of age.

A

Buildings

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21
Q

Which of these is NOT a cause of functional obsolescence?

A

wear and tear. wear and tear is physical deterioration.

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22
Q

A 12 year old roof with an expected life of 20 years would have experienced depreciation of $______ if the cost new of the roof is $8,000.

A

4800

23
Q

Which would NOT cause external obsolescence?

A

leaking septic in the back yard

24
Q

Of the three general types of depreciation, which type occurs off the site?

A

external

25
Q

When estimating depreciation, which of these items is likely to be considered a long-lived item?

A

girders

26
Q

Which of these factors is most likely to cause external obsolescence to a residential property?

A

A gas station/convenience store located across the street

27
Q

A 6 year old water heater with an expected life of 15 years will have experienced depreciation of ____%.

A

40

28
Q

A hot water furnace in a building costs $22,000 to replace. It has an expected life of 30 years, and it is 24 years old. How much short­lived depreciation is attributable to this item?

A

17600

29
Q

A building has an effective age of 18 and a total economic life of 60 years. It cost $520,000 new and its site value is $125,000. What is the indicated percentage of age­-life depreciation?

A

30%

30
Q

Which type of physical deterioration is considered to be curable?

A

deferred maintenance only. depreciation attributable to short-lived and long-lived components are incurable.

31
Q

The subject is a 25 year old building that would cost $180,000 to build new today. It is in good condition and you estimate the effective age to be 20 years. Your estimate of total economic life is 60 years, based on your knowledge of similar properties. What is its present, depreciated value?

A
  1. Cost Approach Using Age- Life Method. 20 ÷ 60 = .333. $180,000 X .333 = $60,000 depreciation. $180,000 - $60,000 depreciation = $120,000.
32
Q

A roof on a building costs $18,000 to replace. It has an expected life of 25 years, and it is 10 years old. How much short-lived depreciation is attributable to this item?

A

$7,200

33
Q

Normal wear and tear on a building is classified as __________.

A

Physical deterioration. Physical deterioration is “The wear and tear that begins when a building is completed and placed into service.”

34
Q

“The period over which improvements to real estate contribute to real property value” is the definition of

A

economic life

35
Q

Assume a house would rent for $1,000 per month in a normal neighborhood. In this neighborhood, which is near a busy interstate highway, it can only rent for $950 per month. The appropriate GRM is 135. How much external obsolescence is caused by the highway?

A
  1. Capitalization of Income Loss. $1,000 - $950 = $50. $50 X 135 = $6,750.
36
Q

The amount of depreciation attributed to deferred maintenance is measured by

A

the cost to cure the deferred maintenance item

37
Q

Which of these entities requires an appraiser to provide an estimate of remaining economic life?

A

FHA

38
Q

True or False: Effective age is the same as chronological age.

A

FALSE

39
Q

A built-­in dishwasher and stove have replacement costs of $350 and $500, respectively. They are both 6 years old and have a remaining life of 9 years. What is the total of short­-lived physical depreciation attributable to these appliances?

A
  1. Short-Lived Depreciation. 6 + 9 = 15. 6 ÷ 15 = .40. $350 + 500 = $850. $850 X .40 = $340.
40
Q

A new building is expected to remain standing for 80 years. This period is the building’s ____________ life.

A

physical

41
Q

Economic feasibility is indicated if the __________ is ______________ the ______________ of the property.

A

cost to cure, equal to or less than, anticipated increase in value

42
Q

A short-­lived item is a building component with an ______________ life that is shorter than the _______________ life of the entire structure.

A

expected remaining economic, remaining economic

43
Q

Which is NOT an example of a long-lived item?

A

water heater

44
Q

Physical deterioration is best described as

A

wear and tear

45
Q

“The impairment of functional capacity of improvements according to market tastes and standards” is the definition of

A

functional obsolescence

46
Q

A building has an effective age of 25 and a total economic life of 80 years. What is its remaining economic life?

A

55

47
Q

Which type of age is based on the amount of observed deterioration and obsolescence the improvement has sustained?

A

effective

48
Q

In a high-quality residential property, an unattractive kitchen that does not have enough cabinet space to meet market tastes and demands will likely result in:

A

Functional obsolescence

49
Q

Which type of depreciation is generally considered to be incurable?

A

external obsolescence

50
Q

“The ability of a property or building to be useful and perform the function for which it was intended according to current market tastes and standards” is the definition of __________________.

A

functional utility

51
Q

True or False: Functional obsolescence may be present in a brand-new structure.

A

TRUE

52
Q

A property is found to suffer $20,000 in external obsolescence because of its proximity to an industrial plant. The subject’s land represents 20% of its value. What is the dollar amount of external obsolescence attributable to the building improvements?

A
  1. $20,000 x 80% = $16,000. The remaining $4,000 in external obsolescence is attributable to the land.
53
Q

An outdated kitchen can be remodeled at a cost of $15,500. After remodeling, the value of the home will increase by $14,000. This item of depreciation is considered

A

incurable. This is incurable, because the cost to cure is more than the anticipated increase in property value.

54
Q

True or False: A building may be obsolete and valueless even though it is still standing and is physically sound.

A

TRUE

02 Basic App Proc Quiz (21 decks)

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