A 15-year-old building has a supported effective-age estimate of 10 years after comparison of condition and utility. What is its effective age?
Correct Answer
B) 10 years.
The question supplies a supported effective-age estimate of 10 years, based on condition and utility compared with market standards. It differs from 15 years chronological age. Appearance alone would not establish a precise effective age or quantify market depreciation without analysis.
Why This Is the Correct Answer
Option B is correct because the stem gives a supported effective-age estimate of 10 years based on condition and utility. Effective age is the age indicated by condition and utility, so it is 10 years even though the building is 15 years old chronologically.
Why the Other Options Are Wrong
Option A: 15 years.
Option A, 15 years, is the building's chronological age. Effective age is based on condition and utility, and the supported estimate here is 10 years.
Option C: 12.5 years.
Option C, 12.5 years, averages actual and effective age ((15 + 10) / 2 = 12.5). Effective age is not a blend of the two; the supported estimate of 10 years is the effective age.
Option D: 25 years.
Option D, 25 years, adds actual age and effective age (15 + 10 = 25). No rule combines the two this way, so it does not follow from the facts; the effective age is 10 years.
Calendar age versus condition age
Actual age comes from the calendar; effective age comes from condition and utility. The appraiser estimates the second one.
How to use: Use calendar versus condition to keep the two ages from being swapped.
Exam Tip
When a question supplies a supported effective age, use it as given. Do not combine it with actual age through addition or averaging.
Common Mistakes to Avoid
- -Using chronological age as effective age
- -Averaging actual and effective age instead of using the supported estimate
- -Estimating effective age from appearance alone without analysis
Concept Deep Dive
Analysis
This question tests the difference between chronological age and effective age. Effective age is the age indicated by a building's condition and utility, and the stem directly supplies a supported estimate. The task is to recognize that the supported estimate, not the actual age, is the effective age.
Background Knowledge
Chronological or actual age is the number of years since construction. Effective age reflects the building's condition and utility, so a well-maintained or updated building can have an effective age lower than its actual age. Because buildings of the same age vary in condition, effective age is the better indicator of how the market perceives age.
Real-World Application
An appraiser inspects a 15-year-old home with a new roof, updated kitchen and good maintenance. Comparing it with similar homes, she concludes it has an effective age of about 10 years and uses that in her depreciation analysis.
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