chapter 7 cost approach, accrued depreciation

Question 1

a loss in property value from any cause; the difference between the cost of an improvement on the effective date of the appraisal and the market value of the improvement on the same date.

Answer 1

depreciation

Question 2

There are three different kinds of depreciation:

Answer 2

Physical deterioration
Functional obsolescence
External obsolescence

Question 3

The wear and tear that begins when a building is completed and placed into service.

Answer 3

physical deterioration

Question 4

A form of physical deterioration that can be practically and economically corrected as of the date of appraisal.

Answer 4

curable physical deterioration

Question 5

A form of physical deterioration that cannot be practically or economically corrected as of the date of appraisal.

Answer 5

incurable physical deterioration

Question 6

The impairment of functional capacity of improvements according to market tastes and standards.

Answer 6

functional obsolescence

Question 7

Impairment of the functional utility of a property or building according to market tastes and standards; equivalent to functional obsolescence when on-going change makes layouts and features obsolete and impairs value.

Answer 7

functional inutility

Question 8

The difference between the cost new and the current value of a property on the same date is called \_\_\_\_\_\_.
Effective loss
Depreciation
Economic loss
Book value

Answer 8

depreciation

Question 9

A poor floor plan could cause \_\_\_\_\_.
Physical deterioration
Functional obsolescence
External obsolescence
Economic obsolescence

Answer 9

Functional obsolescence

Question 10

Physical deterioration can either be curable or incurable.
True
False

Answer 10

TRUE

Question 11

Physical and external depreciation are always part of the structure.
True
False

Answer 11

FALSE

Question 12

Functional obsolescence cannot be present in a new building.
True
False

Answer 12

FALSE

Question 13

Unless a building is brand new, there is always physical deterioration present.
True
False

Answer 13

FALSE

Question 14

These are the type of things that come readily to mind when discussing functional obsolescence. This would include the old-fashioned kitchen, old-fashioned bath, etc.

Answer 14

OUTMODED ITEMS

Question 15

Sometimes, elements of a structure are simply inadequate. For example, the heating system is not large enough or the insulation is inadequate.

Answer 15

inadequacies

Question 16

these are things that are more than adequate for their intended purpose. Someone paid more for something than was necessary. They will not be able to recoup the additional expense in the marketplace.

Answer 16

superadequacies

Question 17

An element of depreciation; a diminution in value caused by negative externalities and generally incurable on the part of the owner, landlord, or tenant.

Answer 17

External obsolescence

Question 18

The three primary methods of estimating depreciation are:

Answer 18

Age - life method
Market extraction method (sometimes known as the sales comparison method)
Breakdown method (sometimes called the observed condition method)

Question 19

A subject property suffers a value loss of $10,000 due to an outdated kitchen. This kitchen can be updated at a cost of $9,000. What type of depreciation is this?
Physical deterioration, curable
Physical deterioration, incurable
Functional obsolescence, curable
Functional obsolescence, incurable

Answer 19

Functional obsolescence, curable

Question 20

The most detailed method for estimating depreciation is the \_\_\_\_\_\_\_\_\_\_ method.
Unit-in-place
Age-life
Breakdown
None of the above

Answer 20

breakdown

Question 21

A dwelling's proximity to a busy expressway could result in \_\_\_\_\_\_\_\_.
Physical deterioration
Functional obsolescence
External obsolescence
Functional utility

Answer 21

external obsolescence

Question 22

External obsolescence is usually incurable.
True
False

Answer 22

false

Question 23

Functional obsolescence cannot be cured.
True
False

Answer 23

false

Question 24

What is another name for the breakdown method of estimating depreciation?
Sales comparison method
Observed condition method
Subdivision development method
None of the above

Answer 24

observed condition method

Question 25

In many cases, external obsolescence will be shared by both land and building components.
True
False

Answer 25

false

Question 26

A dwelling's proximity to a busy expressway could result in \_\_\_\_\_\_.
Physical deterioration
Functional obsolescence
External obsolescence
Functional utility

Answer 26

External obsolescence

Question 27

Wear and tear on a building is classified as \_\_\_\_\_.
Physical deterioration
Functional obsolescence
External Obsolescence
Economic Obsolescence

Answer 27

physical deterioration

Question 28

What is another name for the breakdown method of estimating depreciation?
Sales comparison method
Age-life method
Subdivision development method
Observed condition method

Answer 28

Observed condition method

Question 29

Which of these would be an example of physical deterioration?
Worn out roof shingles
Location near an industrial plant
Poor room layout
All of these are examples of physical deterioration

Answer 29

worn out roof shingles

Question 30

A layout deficiency in a house results in a loss in value of $5,000. The layout deficiency could be corrected at a cost of $6,500. This depreciation is categorized as \_\_\_\_\_\_.
Physical deterioration, curable
Physical deterioration, incurable
Functional obsolescence, curable
Functional obsolescence, incurable

Answer 30

Functional obsolescence, incurable

Question 31

A subject property suffers a value loss of $10,000 due to an outdated kitchen. This kitchen can be updated at a cost of $9,000. What type of depreciation is this?
Physical deterioration, curable
Physical deterioration, incurable
Functional obsolescence, curable
Functional obsolescence, incurable

Answer 31

Functional obsolescence, curable

Question 32

A poor floor plan could cause \_\_\_\_\_\_\_\_.
Physical deterioration
Functional obsolescence
External obsolescence
Economic obsolescence

Answer 32

Functional obsolescence

Question 33

The period of time over which a structure or a component of a property may reasonably be expected to perform the function for which it was designed is the definition of \_\_\_\_\_\_\_ life.
Useful
Physical
Economic
Remaining

Answer 33

useful