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
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.
More cost-approach Questions
In a cost approach for a proposed building, the appropriate cost basis is generally:
A 45-year-old office building has undergone multiple high-quality renovations, including HVAC replacement, seismic retrofitting, and full interior modernization. Its functional layout remains competitive with new construction, and it occupies a stable, well-located corridor. The appraiser estimates its total economic life at 70 years. Which estimate of effective age is most supportable under USPAP and recognized cost approach methodology?
A warehouse cost $210,000 to build when the cost index stood at 105. The index is now 210. Its indicated current cost is:
An appraiser is estimating accrued depreciation for a commercial office building using the age-life method. The building was constructed in 1992 and has a total economic life of 60 years. As of the appraisal date in 2024, the appraiser determines the property’s effective age is 36 years due to consistent maintenance, modernized systems, and favorable market perception. What is the percent of accrued depreciation indicated by the age-life method?
Which event would RAISE a building's effective age relative to last year's estimate?
Two identical houses were built the same year; one has been meticulously maintained, the other neglected. Their age-life analyses differ because:
Which statement is MOST consistent with USPAP Standards Rule 6 regarding the identification and treatment of external obsolescence in the cost approach?
A 40-year-old industrial warehouse has undergone no major renovations and suffers from outdated electrical systems, inefficient insulation, and obsolescent loading dock design. Market evidence indicates similar properties typically exhibit functional obsolescence reducing utility by 15% and external obsolescence reducing value by 10%. If the appraiser uses the age-life method with a total economic life of 50 years, how should effective age be adjusted to reflect these conditions?
In developing an age-life depreciation estimate, an appraiser assigns an effective age of 16 years and a total economic life of 40 years. Later, the appraiser discovers that comparable properties in the same submarket have recently sold with effective ages averaging 12 years and total economic lives averaging 45 years — and those sales exhibited superior energy efficiency and adaptive reuse features. What is the appraiser’s USPAP-compliant obligation regarding the original effective age estimate?
The age-life method expresses depreciation as:
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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?
Next Question
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?