The difference between an improvements total economic life and its remaining economic life is the:
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deterioration is best described as wear and tear True or False: External obsolescence can be shared between building and land. True In most situations, which of these would be considered an example of a
superadequacy? all of these True or False: Functional obsolescence may be present in a brand-new structure. True Depreciation is defined as a loss in property value from any cause The difference between the cost of an improvement and its market value on the effective date of the appraisal is depreciation Which type of depreciation is generally
considered to be incurable? external obsolescence "The period over which improvements to real estate contribute to real property value" is the definition of economic life A
building has an effective age of 18 and a total economic life of 60 years. It cost $520,000 new and its site value is $125,000. What is the indicated percentage of age-life depreciation? 30% __________ will lose value over time just because of age. Buildings True or False: Effective age is the same as chronological age. False A building has an effective age of 12 and a total economic life of 60 years. It cost $320,000 new and its site value is $95,000. What is the indicated value by cost approach? $351,000 12 / 60 = 20% depreciation. $320,000 x 20% = $64,000. $320,000 - $64,000 + $95,000 = $351,000 The number of years that have elapsed since a building was constructed is its actual age True or False: A building may be obsolete and valueless even though it is still standing and is physically sound. True A new building is expected to remain standing for 80 years. This period is the building's ____________ life. physical A building has an effective age of 25 and a total economic life of 80 years. What is its remaining economic life? 55 80 - 25 = 55 remaining economic life True or False: Physical deterioration can be divided into three categories: deferred maintenance; short-lived components; and long-lived components. True A building has a cost new of $400,000. Deferred maintenance items have been identified at a cost of $9,000. Short-lived depreciation has been identified at $15,000; these
short-lived items have a total cost of $45,000. The building has an effective age of 20 years and a total economic life of 50 years. What is the amount of depreciation attributable to the long-lived items? $138,400 $400,000 - $9,000 - $45,000 = $346,000 (cost of long-lived items). 20 / 50 = 40% depreciation. $346,000 x 40% = $138,400. A hot water furnace in a
building costs $22,000 to replace. It has an expected life of 30 years, and it is 24 years old. How much shortlived depreciation is attributable to this item? $17,600 24 / 30 = 80%. $22,000 x 80% = $17,600. A home suffers functional obsolescence of $10,000 because it lacks a second bathroom, which could be installed at a cost of $9,500. This type of obsolescence
is considered curable Which type of physical deterioration is considered to be curable? deferred maintenance only What term is defined as "Items of wear
and tear on a property that should be fixed now to protect the value or income- producing ability of the property"? deferred maintenance When estimating depreciation, which of these items is likely to be considered a long-lived item? girders A roof on a building costs $18,000 to replace. It has an expected life of 25 years, and it is 10 years old. How much short-lived depreciation is attributable to this item? $7,200 10 / 25 = 40%. $18,000 x 40% = $7,200. An outdated kitchen can be remodeled at a cost of $15,500. After remodeling,
the value of the home will increase by $14,000. This item of depreciation is considered incurable A property is found to suffer $20,000 in external obsolescence because of its proximity to an industrial plant. The subject's land represents 20% of its value. What is the dollar amount of external obsolescence attributable to the building
improvements? $16,000 $20,000 x 80% = $16,000. The remaining $4,000 in external obsolescence is attributable to the land. Which of these is NOT a cause of functional obsolescence? wear and tear External
obsolescence can be marketwide The amount of depreciation attributed to deferred maintenance is measured by the cost to cure the deferred maintenance item The subject is a 15 year old duplex that would cost $240,000 to build new today. It is in good condition and you estimate the effective age to be 10 years. Your estimate of total economic life is 50 years. Its land value is $60,000. What is its value by the cost
approach? $252,000 10 ÷ 50 = .20. $240,000 X .80 = $192,000. $192,000 + $60,000 = $252,000. "The period over which improvements to real estate contribute to property value" is the definition of _______________ life. economic Assume a
house would rent for $1,000 per month in a normal neighborhood. In this neighborhood, which is near a busy interstate highway, it can only rent for $950 per month. The appropriate GRM is 135. How much external obsolescence is caused by the highway? $6,750 $1,000 - $950 = $50. $50 X 135 = $6,750. Which is NOT an example of a long-lived item? water heater The replacement cost new of the improvements is $295,500, the land value is $75,000 and the effective age is 17 years. The total economic life is estimated to be 60 years. The subject has deferred maintenance items that total $5,500. After these repairs, the effective age will be reduced to 15 years. What is the value of the property using a
modified age-life method? $292,500 Which of these is an example of deferred maintenance? A broken window Which would NOT cause external obsolescence? leaking septic in the back yard A 10-year-old furnace with an expected life of 25 years will have experienced depreciation of: 40% 10 divided by 25 is 0.40 or 40%. "The
impairment of functional capacity of improvements according to market tastes and standards" is the definition of functional obsolescence Which would NOT be a deferred maintenance item? older roof showing some wear Normal wear and tear on a building is classified as __________. Physical deterioration Which of these entities requires an appraiser to provide an estimate of remaining economic life? FHA Which type of age is based on the amount of observed deterioration and obsolescence the improvement has sustained? effective A 6 year old water heater with an expected life of 15 years will have experienced depreciation of ____%. 40 6 ÷ 15 = .40, or 40%. The subject is a 25 year old building that would cost $180,000 to build new today. It is in good condition and you estimate the effective age to be 20 years. Your estimate of total economic life is 60 years, based on your knowledge of similar properties. What is its present, depreciated value? $120,000 20 ÷ 60 = .333. $180,000 X .333 = $60,000 depreciation. $180,000 - $60,000 depreciation = $120,000. Of the three general types of depreciation, which type occurs off the site? external Which of these factors is most likely to cause external obsolescence to a residential property? A gas station/convenience store located across the street The three general types of depreciation are: Physical, functional, and external "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 "The ability of a property or building to be useful and perform the function for which it was intended according to current market tastes and standards" is the definition of __________________. functional utility Economic feasibility is indicated if the __________ is ______________ the
______________ of the property. cost to cure, equal to or less than, anticipated increase in value A short-lived item is a building component with an ______________ life that is shorter than the _______________ life of the
entire structure. expected remaining economic, remaining economic A built-in dishwasher and stove have replacement costs of $350 and $500, respectively. They are both 6 years old and have a remaining life of 9 years. What is the total of short-lived physical
depreciation attributable to these appliances? $340 6 + 9 = 15. 6 ÷ 15 = .40. $350 + 500 = $850. $850 X .40 = $340. What is the definition of remaining economic life?Remaining economic life (REL) is the estimated time period for which the improvements (the house/building) continue to contribute to the value of the property. It describes the amount of time a home will remain on a site, until it is to be demolished for redevelopment.
What is the difference between economic life and useful life?Economic life refers to the length of time an asset is expected to be useful to the owner. It is also called useful life or depreciable life. The measure of an asset's usefulness is how profitable it is to keep – in other words, how long an asset generates more income than it costs to maintain and operate.
What is the total economic life?What is Economic Life? Economic life is the expected period of time during which an asset remains useful to the average owner. When an asset is no longer useful to its owner, then it is said to be past its economic life. The economic life of an asset could be different than its actual physical life.
What is the difference between economic life and physical life?While the physical life of an asset means the period for which the asset can provide service to the company whereas the economic life of an asset implies the period for which the asset can provide profitable service to the company.
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