M1U6S2Ex7

Question 1

What are the 5 steps in the cost approach?

Answer 1

1. Estimate the value of the site
2. Estimate the replacement cost of the building
3. Estimate the accrued depreciation of the building
4. Estimate the total depreciated cost of the building by subtracting the accrued depreciation from the replacement cost
5. Add the value of the site to the total depreciated cost of the building to arrive at an estimate of market value for the property

Question 2

Why is the value of a site by the direct comparison approach used in the cost approach?

Answer 2

It is the direct comparison approach to value that is most appropriate and most often used in valuing sites. Because it measures the attitudes of sellers and buyers, it provides the most easily understood and usually the most accurate value estimate

Question 3

.

Answer 3

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Question 4

In measuring accrued physical depreciation, what is the significance of the terms curable and incurable

Answer 4

Curable- The physical breakdown of structures that the prudent owner would anticipate repairing immediately
Incurable- Structures and their components that are not economically feasible to fix (cost to fix is greater)

Question 5

Difference between short-lived and long-lived component parts of a structure

Answer 5

Short-lived items are those parts of the building that might not be ready to be cured but have a remaining life expectancy that is shorter than that of the basic structure

Long-lived items are basic structural components that normally have economic lives that match or exceed the economic life of the entire structure

Question 6

What is the most common method of site evaluation?

Answer 6

The comparative sales method

Question 7

In the sequence of adjustments, the first items to be adjusted for is what?

Answer 7

Time