A 1970s home's floor plan routes all bedroom traffic through the kitchen, and reconfiguring walls would cost far more than buyers would pay for the change. This is:
Correct Answer
D) Incurable functional obsolescence
Why this is correct: Incurable functional obsolescence exists when a design flaw is not economically practical to correct. The cost to reconfigure the floor plan exceeds the value it would add, so it is 'incurable.' Why the other choices are wrong: "Curable functional obsolescence" is wrong because the problem is not economically feasible to fix. "Incurable physical deterioration" is wrong because the issue is design, not physical wear. "External obsolescence from age" is wrong because external obsolescence originates outside the property, and age alone is not the cause. Exam tip: 'Incurable' means not economically feasible to fix. If the cost to cure > value added, it's incurable.
Why This Is the Correct Answer
The traffic-pattern defect originates in the building's own design, which places it squarely in functional obsolescence rather than physical or external. The stem then states that reconfiguring walls would cost far more than buyers would pay for the improvement, so the cost to cure exceeds the value added. That failure of the economic test makes the obsolescence incurable. Incurable functional obsolescence is measured by the value penalty the market imposes, not by the cost of the cure the market will not fund.
Why the Other Options Are Wrong
Option A: Curable functional obsolescence
Curable requires that spending the money returns at least as much value, and the stem says the opposite in plain terms. A prudent owner would not undertake a renovation that costs more than it adds, and the appraiser follows the prudent owner. Calling it curable would also invite the wrong measurement, since curable items are measured at cost to cure.
Option B: Incurable physical deterioration
Physical deterioration covers worn, aged or damaged materials such as failing finishes, a spent roof or deteriorated framing. Nothing here is worn out; the walls are presumably sound and simply in the wrong places. A perfectly maintained house can carry heavy functional obsolescence.
Option C: External obsolescence from age
External obsolescence comes from outside the property line, such as an adjacent nuisance use, a declining employment base or an unfavorable interest rate environment. A floor plan is entirely within the property, so it cannot be external. Age by itself is also not a cause of depreciation; it is only a proxy for the wear and dated design that age tends to produce.
Where From, Worth Fixing
Two questions in order. Where does the problem come from: worn material means physical, bad design means functional, off the property means external. Is it worth fixing: if the cure adds at least what it costs, curable; if not, incurable.
How to use: Read the defect, answer 'where from' first to pick the category, then hunt the stem for a cost-versus-value comparison to pick curable or incurable. Both halves of the label must match the facts, which is how these four-option sets are constructed.
Exam Tip
Phrases like 'would cost far more than buyers would pay' are the exam's shorthand for incurable; treat them as a direct instruction.
Common Mistakes to Avoid
- -Labeling a dated design as physical deterioration because the house is old
- -Calling a defect curable simply because it is physically possible to fix
- -Treating age itself as external obsolescence
Concept Deep Dive
Analysis
This question sorts a defect into the correct depreciation category and then into the correct curability class. The three causes of accrued depreciation are physical deterioration, which is wear and aging of materials; functional obsolescence, which arises from the design, layout, quality or capacity of the improvements themselves; and external obsolescence, which is caused by influences outside the property boundary. A floor plan that forces bedroom traffic through the kitchen is a layout defect inside the improvements, so it is functional. The curability test is purely economic: an item is curable when the value added by curing equals or exceeds the cost to cure, and incurable when it does not.
Background Knowledge
You need the three causes of accrued depreciation and the ability to place a defect by asking whether it comes from wear, from design, or from off-site influences. You also need the economic curability test comparing value added against cost to cure.
Real-World Application
An appraiser working a 1970s ranch with a walk-through kitchen finds paired sales showing a consistent discount versus comparable homes with a hallway layout, reports that discount as incurable functional obsolescence, and does not use a contractor's remodel bid as the measure.
More Cost Approach Questions
In a cost approach for a proposed building, the appropriate cost basis is generally:
A warehouse cost $210,000 to build when the cost index stood at 105. The index is now 210. Its indicated current cost is:
The age-life method expresses depreciation as:
Market extraction of depreciation is limited by the fact that it:
Functional obsolescence caused by a deficiency is measured as curable when:
Curable physical deterioration is measured at cost to cure because:
A 2,050 sq ft dwelling is priced at $178 per square foot with a $34,000 detached garage and $21,500 of site improvements. Cost new is:
A house has three bedrooms sharing one bathroom, and adding a second bath is economically justified. This is:
Direct costs in a construction budget include:
An appraiser writes that a 40-year-old house has an effective age of 10 but describes original wiring, original kitchen and a 25-year-old roof. The report's problem is:
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Previous Question
A roof with a 25-year life is 10 years old and would cost $18,000 to replace new. What is its depreciation as a short-lived item?
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A commercial office building was constructed in 2005 with a full-floor mechanical penthouse housing HVAC equipment for the entire structure. Current market design standards call for distributed, floor-by-floor mechanical rooms, eliminating the need for a dedicated penthouse. The penthouse occupies 1,200 sq ft of otherwise rentable space and incurs $18,000 annually in excess maintenance and energy costs due to outdated, oversized equipment. An appraiser estimates the cost to remove the penthouse and retrofit mechanical systems floor-by-floor at $320,000 — but doing so would yield no incremental rental income or value increase. How should the appraiser treat the penthouse in the cost approach?