Part 11

Question 1

1. Physical deterioration
2. Functional obsolescence
3. External obsolescence

These are the three what?

Answer 1

Identify the basic components of depreciation.

Question 2

This is the slow destruction (or wear and tear) of the structural components that goes on every day, from the moment a building is completed.

Answer 2

Physical deterioration.

1/3 major components of depreciation

The physical components of a structure simply wear out over time; they rust, rot, warp, peel, and settle. This process can be hastened by infestation—such as termites and other wood destroying insects and action of the elements—such as moisture infiltration, sun bleaching, and other forces of nature.

Question 3

The impairment of functional capacity attributed to a particular property according to market tastes and standards.

Answer 3

Functional obsolescence.

2/3 major components of depreciation

The older a building becomes, the more likely it is to have functional obsolescence. However, it is possible to have a 50-year-old building with no functional obsolescence, while a new building may have functional obsolescence while still in the blueprint stage due to poor design.

Question 4

This type of depreciation comes from outside the boundaries of the property. It is a loss in value from physical or economic causes external to the property.

Answer 4

External Obsolescence

3/3 major components of depreciation

The negative factor causing the loss in value is often identified as locational or economic.

Question 5

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

Answer 5

Depreciation

Question 7

The period over which improvements to real estate contribute to property value. It is usually shorter than physical life (i.e., how long the building will stand and provide shelter). The period can be extended by means of renovations or remodeling of the improvements.

Answer 7

Economic Life

You can have a building that is still standing (such as an old barn) but is no longer being put to use as it was intended. Its economic life is long gone, but it is still physically standing (until a strong wind comes along and topples it).

Question 8

This is the estimated period over which existing improvements are expected to contribute economically to a property. What is left of the property to contribute to its usefulness.

Answer 8

Remaining Economic Life

Question 9

The number of years that have elapsed since the construction of an improvement was completed; also called historical or chronological age.

Answer 9

Actual Age

Question 10

The age of property that is based on the amount of observed deterioration and obsolescence it has sustained, which may be different from its chronological age.

Answer 10

Effective age

Question 11

1. Market extraction method
2. Economic age-life method
3. Breakdown method

These are the three primary methods of estimating what?

Answer 11

Accrued depreciation

Question 12

This method relies on the availability of comparable sales from which you can extract the depreciation.

Answer 12

Market extraction method

1/3 primary methods of estimating accrued depreciation

Question 13

A method of estimating depreciation in which the ratio between the effective age of a building and its total economic life is applied to the current cost of the improvements to obtain a lump-sum deduction; also known as the age-life method.

Answer 13

Economic age-life method

2/3 primary methods of estimating accrued depreciation

Question 14

A method of estimating depreciation in which the total diminution in the value of a property is estimated by analyzing and measuring each cause of depreciation (physical, functional, and external) separately.

Answer 14

Breakdown method

3/3 primary methods of estimating accrued depreciation

Question 15

The older a building becomes, the greater is the likelihood of it having

Answer 15

all of these answers.

Physical deterioration, functional obsolescence, and external obsolescence can arise over the passage of time and changes in market conditions. A building can suffer from all three forms of depreciation.

Question 16

Which statement best describes the term “depreciation”?

Answer 16

the difference between the reproduction or replacement cost and the market value of the improvements as of the effective date of the appraisal

Question 17

When is an item of depreciation curable?

Answer 17

when the cost to cure is less than the expected increase in value

Question 18

Which of the following describes the period of time over which the improvements will contribute to property value?

Answer 18

Economic life

The economic life of improvements can be affected by physical, economic, social, and geographic forces, and can be extended by renovations and remodeling.

Question 19

Which of the following describes the age of a property that is based on the amount of observed deterioration and obsolescence it has sustained?

Answer 19

effective age

Assume that an improvement has an actual age of 50 years, but has been renovated, remodeled, rehabbed, or has had a high level of maintenance over the years. If it can compete in the market with much newer properties that have actual ages of 15 to 20 years, then the 50-year-old improvement has an effective age of 15 to 20 years.

Question 20

Which of the following describes the number of years that have elapsed since the construction of the improvements was completed?

Answer 20

all of these answers

The actual age of improvements is also known as historical age and chronological age. It can be significantly different from effective age depending on renovation, remodeling, and level of maintenance.

Question 21

You have a 20,000 square feet retail store with a concrete slab floor, stucco on masonry block exterior walls, and metal trusses as a roof structure partially supported by open steel framing members. What class of construction is this building?

Answer 21

Class C

Question 22

A building has been designed for maximum economic potential and to comply with standard construction codes, but extras in ornamentation and finishes are not evident. What quality rank should be chosen for this building?

Answer 22

average

Average quality buildings constitute the largest group of buildings constructed, approximately 50% of all buildings. Buildings are generally designed for maximum economic potential. They comply with standard code construction and have simple ornamentation and finishes.

Question 23

Suppose you are appraising a high-rise apartment building with fireproofed structural steel frames, concrete floors and roof, and metal and glass paneled walls. What class of construction is this building?

Answer 23

Class A

The primary feature of Class A buildings is the fireproofed, protected structural steel frame and metal deck flooring and roof with a concrete topping. The fireproofing may be masonry, poured concrete, plaster, sprayed fiber, or any other type of material that will give a high fire-resistance rating.

Question 24

The period of time over which the improvements will contribute to property value is described by which of the following terms?

Answer 24

economic life

The economic life of improvements can be affected by physical, economic, social, and geographic forces, and can be extended by renovations and remodeling.

Question 25

Which of the following types of depreciation would a three-story office building without an elevator suffer?

Answer 25

functional obsolescence

Question 26

The major employer in a small city just went out of business. This resulted in a loss of jobs and a subsequent decline in real estate values. Which of the following terms best describes this loss?

Answer 26

external obsolescence

Forces external to a property can include loss of employment, increase in interest rates, or an imbalance in supply and demand.

Question 27

An appraisal of a single-family residence located adjacent to a busy highway might suffer from which of the following forms of depreciation?

Answer 27

external obsolescence

Forces external to a property as a result of being located next to a busy highway, such as noise, smoke, dust, and vibration, can cause a loss in value.

Question 28

What type of construction would a high-rise office tower be according to Marshall Valuation Service?

Answer 28

Class A fireproofed steel frame

Question 29

Which of the following statements regarding functional obsolescence is the most correct?

Answer 29

Functional obsolescence can be caused by poor design or layout.

Question 30

According to Marshall Valuation Service, which construction class refers to reinforced concrete frame?

Answer 30

Class B

Question 31

Which of the following statements regarding external obsolescence is the most correct?

Answer 31

Any of these answers is correct.

• External obsolescence can be caused by a plant closing in a local market.
• External obsolescence can be caused by a plant closing in a local market.
• External obsolescence can be caused by a plant closing in a local market.

Question 32

Within each construction class, Marshall Valuation Service assigns a quality rating. What are the four quality ratings?

Answer 32

excellent, good, average, low-cost

Question 33

Which of the following statements regarding physical deterioration is the most correct?

Answer 33

Physical deterioration can be caused by all of these answers.

• Physical deterioration can be caused by action of the elements.
• Physical deterioration can be caused by insect infestation.
• Physical deterioration can be caused by wear and tear.