chapter 8 cost approach break down and market extraction methods Flashcards
Items of physical deterioration or functional obsolescence that are economically feasible to cure. Curing an item of depreciation is economically feasible if the cost to cure is equal to or less than the anticipated increase in the value of the property that would result after curing the depreciation.
curable depreciation
Physical deterioration can be divided into three categories:
Deferred maintenance
Short-lived components
Long-lived components
Items of wear and tear on a property that should be fixed now to protect the value or income- producing ability of the property, such as a broken window, a dead tree, a leak in the roof, or a faulty roof that must be completely replaced. These items are almost always curable.
deferred maintenance
A building component with an expected remaining economic life that is shorter than the remaining economic life of the entire structure.
short-lived item
Curable items are those items of physical deterioration or functional obsolescence that are \_\_\_\_\_\_\_\_\_\_\_ to cure. Physically possible Functionally possible Economically feasible Potentially feasible
Economically feasible
A 9 year old water heater has an expected life of 15 years. If the replacement cost of the water heater is $800, the amount of short-lived depreciation would be \_\_\_\_\_\_\_. $380 $400 $480 $620
$480
Roof covering, carpeting and water heaters are examples of \_\_\_\_\_\_\_\_\_\_\_\_\_ items. Physical, curable Deferred maintenance Short-lived Long-lived
short-lived
Deferred maintenance is considered to be \_\_\_\_\_\_\_\_\_\_; the short-lived and long-lived components are \_\_\_\_\_\_\_\_\_\_. Incurable, incurable Curable, obsolete Incurable, curable Curable, incurable
Curable, incurable
A building component or site improvement expected to have the same useful life as the entire structure.
long-lived items
The ability of a property or building to be useful and to perform the function for which it is intended according to current market tastes and standards; the efficiency of a building’s use in terms of architectural style, design and layout, traffic patterns, and the size and type of rooms.
functional utility
The house you are appraising has a total cost new of $214,552. It is 15 years old and has an estimated remaining economic life of 45 years. The cost to cure deferred maintenance items is $825. Short lived items of depreciation have been identified totaling $8,600. What is the amount of long-lived depreciation attributable to the building? $46,902.23 $51,281.75 $55,873.91 $58,717.32
$51,281.75
$214,552 - $825 - $8,600 = $205,127 long lived items cost.
Depreciation is 15 / 60 = 25%. $205,127 x .25 = $51,281.75.
\_\_\_\_\_\_\_\_\_\_ items are often referred to as part of the “bone structure” of the building. Short-lived Long-lived Deferred maintenance Incurable physical
long-lived
A poor layout in a home results in a loss in value of $8,000. This layout deficiency can be corrected at a cost of $9,500. Therefore this layout deficiency would be considered Physical deterioration, curable Physical deterioration, incurable Functional obsolescence, curable Functional obsolescence, incurable
Functional obsolescence, incurable
When applying age-life ratios we utilize the \_\_\_\_\_\_\_ lives of those components. Useful Actual Effective None of the above
useful
The ability of a property or building to be useful and to perform the function for which it is intended according to current market tastes and standards is the definition of \_\_\_\_\_. Functional obsolescence Functional utility Effective age Physical life
functional utility
