chapter 7 cost approach, accrued depreciation Flashcards
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.
depreciation
There are three different kinds of depreciation:
Physical deterioration
Functional obsolescence
External obsolescence
The wear and tear that begins when a building is completed and placed into service.
physical deterioration
A form of physical deterioration that can be practically and economically corrected as of the date of appraisal.
curable physical deterioration
A form of physical deterioration that cannot be practically or economically corrected as of the date of appraisal.
incurable physical deterioration
The impairment of functional capacity of improvements according to market tastes and standards.
functional obsolescence
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.
functional inutility
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
depreciation
A poor floor plan could cause \_\_\_\_\_. Physical deterioration Functional obsolescence External obsolescence Economic obsolescence
Functional obsolescence
Physical deterioration can either be curable or incurable.
True
False
TRUE
Physical and external depreciation are always part of the structure.
True
False
FALSE
Functional obsolescence cannot be present in a new building.
True
False
FALSE
Unless a building is brand new, there is always physical deterioration present.
True
False
FALSE
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.
OUTMODED ITEMS
Sometimes, elements of a structure are simply inadequate. For example, the heating system is not large enough or the insulation is inadequate.
inadequacies
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.
superadequacies
An element of depreciation; a diminution in value caused by negative externalities and generally incurable on the part of the owner, landlord, or tenant.
External obsolescence
The three primary methods of estimating depreciation are:
Age - life method
Market extraction method (sometimes known as the sales comparison method)
Breakdown method (sometimes called the observed condition method)
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
Functional obsolescence, curable
The most detailed method for estimating depreciation is the \_\_\_\_\_\_\_\_\_\_ method. Unit-in-place Age-life Breakdown None of the above
breakdown
A dwelling's proximity to a busy expressway could result in \_\_\_\_\_\_\_\_. Physical deterioration Functional obsolescence External obsolescence Functional utility
external obsolescence
External obsolescence is usually incurable.
True
False
false
Functional obsolescence cannot be cured.
True
False
false
What is another name for the breakdown method of estimating depreciation? Sales comparison method Observed condition method Subdivision development method None of the above
observed condition method
In many cases, external obsolescence will be shared by both land and building components.
True
False
false
A dwelling's proximity to a busy expressway could result in \_\_\_\_\_\_. Physical deterioration Functional obsolescence External obsolescence Functional utility
External obsolescence
Wear and tear on a building is classified as \_\_\_\_\_. Physical deterioration Functional obsolescence External Obsolescence Economic Obsolescence
physical deterioration
What is another name for the breakdown method of estimating depreciation? Sales comparison method Age-life method Subdivision development method Observed condition method
Observed condition method
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
worn out roof shingles
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
Functional obsolescence, incurable
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
Functional obsolescence, curable
A poor floor plan could cause \_\_\_\_\_\_\_\_. Physical deterioration Functional obsolescence External obsolescence Economic obsolescence
Functional obsolescence
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
useful
