Week 4 Seminar (week 3 Content)

Question 1

What is the difference between land and site in real estate valuation?

Answer 1

Land: The earth’s surface, both land and water, and anything that is attached to it whether by the course
of nature or human hands; all natural resources in their original state e.g. mineral deposits, wildlife,
timber, fish, water, coal deposits, soil etc.

Site : Land that has been improved so that it is ready to be used for a specific purpose

Question 2

Discuss factors causing physical deterioration, functional obsolescence and external obsolescence of a residential building?

Answer 2

1. Physical deterioration – result of wear and tear, weathering from the elements, neglect etc
2. Functional obsolescence – features, design, and other elements of the building that are not up to modern standards, super-adequacy or inadequacy
3. External obsolescence – loss of value due to influences outside the property

Question 3

Which following method produces the most comprehensive and accurate estimation of construction cost? 
•Index method
•Comparative unit method
•Quantity survey method
•Unit in place method

Answer 3

Quantity survey method

Question 4

The estimated cost of building an equally functional structure using modern methods and costs is generally referred to as the..?
•Reproduction cost.
•Replacement cost.
•Substitution cost.
•Reproduction value.

Answer 4

Replacement cost

Question 5

In the cost approach to value, which factor of depreciation is not considered?
•Physical deterioration
•Tax depreciation
•Functional obsolescence
•External obsolescence

Answer 5

Tax depreciation

Question 6

With the cost approach to value, a decrease in value as a result of deferred maintenance is referred to as..?
•Accelerated depreciation
•Functional obsolescence
•Physical deterioration
•External obsolescence

Answer 6

Physical deterioration

Question 7

What type of obsolescence is generally not curable?
•Physical
•Functional
•External
•Internal

Answer 7

External

Question 8

When a valuer uses an age-life method for estimating the physical deterioration in the cost approach, what assumption has been made?
•The physical obsolescence and the functional obsolescence of the building are the same
•Deterioration occurs at a constant annual amount
•Deterioration occurs at a compounded average annual rate

Answer 8

Deterioration occurs at a constant annual amount