Dwelling 2,400 sf costs $128/sf and a separate 480 sf garage $46/sf. No cost item overlaps and land is excluded. What total cost new results?
Correct Answer
C) $329,280
2400×128+480×46 = 329280. Common errors: leaving out the garage gives $307,200; pricing the garage at the dwelling rate gives $368,640; pricing the dwelling at the garage rate gives $132,480.
Why This Is the Correct Answer
Option C is correct because the dwelling costs 2,400 × $128 = $307,200 and the garage costs 480 × $46 = $22,080, for a total of $307,200 + $22,080 = $329,280. The square foot method applies each rate to the area it fits.
Why the Other Options Are Wrong
Option A: $132,480
Option A is wrong because $132,480 is (2,400 + 480) × $46, pricing the dwelling at the garage rate. The dwelling uses $128 per square foot, giving a total of $329,280.
Option B: $307,200
Option B is wrong because $307,200 is 2,400 × $128, the dwelling alone, leaving out the $22,080 garage. Adding the garage gives $329,280.
Option D: $368,640
Option D is wrong because $368,640 is (2,400 + 480) × $128, pricing the garage at the dwelling rate. The garage uses $46 per square foot, giving $307,200 + $22,080 = $329,280.
Match rate to room
Living area gets the living rate and the garage gets the garage rate. Multiply each, then add.
How to use: Use this check to avoid applying one rate to all areas in a cost problem.
Exam Tip
Write out each area times its rate on scratch paper before adding; the wrong options usually blend or drop a component.
Common Mistakes to Avoid
- -Pricing the whole building at the garage rate
- -Pricing the garage at the living-area rate
- -Forgetting to add the garage
Concept Deep Dive
Analysis
This question tests applying separate square foot rates to the dwelling and the garage. Each area is multiplied by its own rate, and the two results are added. Using one rate for both areas or dropping one area produces the distractors.
Background Knowledge
The square foot method applies a cost per square foot to the measured area of the improvement. Different components such as finished living area and garages are usually priced at different rates because their construction differs. All relevant direct and indirect costs should be captured without overlap.
Real-World Application
An appraiser uses a cost manual to price a ranch home's 2,400 square feet of living area at one rate and its 480-square-foot garage at a lower rate. The combined figure becomes the improvement cost new in the cost approach.
More Cost Approach Questions
Why can equivalent-utility replacement cost be useful for an obsolete improvement?
An appraiser estimates the current replacement cost new of the improvements at $890,000, accrued depreciation from all causes at $170,000, and land value at $325,000. All necessary cost components and depreciation are included in those amounts. What is the indicated property value?
Improvement cost new is $595,000. Separately supported improvement depreciation deductions of $48,000, $27,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $155,000, already reflecting any site losses. What total indicated value results?
What best supports a claimed loss from a bathroom-layout deficiency?
Improvement cost new is $1,850,000. Separately supported improvement depreciation deductions of $310,000, $620,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
Which scenario most strongly supports giving the cost approach substantial weight?
A cost total $650,000 explicitly includes $40,000 of non-realty FF&E outside the appraised real-property interest. Exclude it. Supported realty-only total depreciation is $55,000. Add site $200,000, with no overlap. What real-property cost indication results?
A 2,200-sf dwelling costs $200 per square foot, and a separate 400-sf garage costs $75 per square foot. These costs are complete and do not overlap. Both have an effective age of 15 years and a total life of 50 years, with straight-line depreciation and no salvage value. No site value or other loss is involved. What is the combined depreciated cost of the dwelling and garage?
A new feature in the improvements has a current cost of $45,000 and a market contribution of $18,000. The entire difference is due to superadequacy, with no physical or external loss and no overlap. What is the loss from the superadequacy?
An external influence causes an annual net income loss of $9,600. The capitalization rate for the loss is 8%, and no other economic factors change. What is the indicated loss in value of the whole property, before allocation between site and improvements?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Income Approach
8.2% of exam