After checking current costs, land value, calculations and physical/functional depreciation, an appraiser finds total cost indications remain above comparable total sale prices in a weakening market. What should be investigated?
Correct Answer
C) External obsolescence or a soft market the cost approach missed
After checking the stated other inputs, investigate omitted external market loss and the relevance of the compared sales. The divergence is a reason for further analysis, not proof of a particular omitted dollar amount. Raising land value or concluding cost new was too low would push the cost indication even higher, so neither explains why it exceeds the sale prices.
Why This Is the Correct Answer
After checking the stated other inputs, investigate omitted external market loss and the relevance of the compared sales. The divergence is a reason for further analysis, not proof of a particular omitted dollar amount. Raising land value or concluding cost new was too low would push the cost indication even higher, so neither explains why it exceeds the sale prices.
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?
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Previous Question
The historical cost of an improvement was $350,000, and an appropriate index multiplier for the same scope of work is 1.20. Total depreciation is 20% of the trended cost, and site value is $175,000. What is the total indicated value?
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Two separately measured, nonoverlapping curable physical-loss allowances are $8,400 for roofing and $2,600 for painting, both supported on the stated cost-to-cure basis. What total allowance results?