Physical paint deterioration costs $4,000 to correct and adds at least $4,000 of value, with no other costs or benefits. What classification fits?
Correct Answer
A) Economically curable physical deterioration.
The physical painting defect is economically curable under the stated full cost $4,000 and supported benefit at least $4,000. Weather can cause physical damage without making the cause an external market influence. Avoid equating every repair invoice to value loss without support.
Why This Is the Correct Answer
Option A is correct because the defect is physical paint deterioration and the value added by repainting, at least $4,000, equals or exceeds the $4,000 cost to cure. Curable physical deterioration occurs when the value added by a repair equals or exceeds the cost to cure.
Why the Other Options Are Wrong
Option B: Economically incurable, since paint is short-lived.
Option B is wrong because it calls the defect economically incurable since paint is short-lived. Curability depends on comparing cost to cure with value added, and here the at-least-$4,000 benefit covers the $4,000 cost, so it is curable.
Option C: Functional loss, because the color can be changed.
Option C is wrong because it calls this a functional loss on the grounds that the color can be changed. The stem describes physical paint deterioration, not a design problem.
Option D: External obsolescence, because weather caused the wear.
Option D is wrong because weather causing wear does not make the loss external obsolescence. Weather is a natural force acting on the property, which produces physical deterioration, not an outside market influence.
Pays for itself, curable
If a repair adds at least as much value as it costs, the item is curable. Otherwise it is incurable.
How to use: Use this test to label any physical or functional item as curable or incurable.
Exam Tip
Classify the cause first, then compare cost to cure with value added; the age or lifespan of the component does not decide curability.
Common Mistakes to Avoid
- -Calling a short-lived item incurable without comparing cost and benefit
- -Calling weather-related wear external obsolescence
- -Treating a paint problem as functional obsolescence
Concept Deep Dive
Analysis
This question tests two separate judgments: the cause of the loss and whether it is economically curable. Peeling paint is physical deterioration. Because the $4,000 cost to repaint is matched or exceeded by at least $4,000 of added value, the defect is economically curable.
Background Knowledge
Physical deterioration can be curable or incurable depending on whether the value added by the repair equals or exceeds the cost to cure. Curable physical deterioration is also called deferred maintenance. Weather and other natural forces cause physical deterioration and are not the same as external obsolescence.
Real-World Application
An appraiser notes peeling exterior paint on a listed home. Local sales evidence shows buyers pay at least the repainting cost for a freshly painted exterior, so the appraiser treats the item as curable physical deterioration measured by the cost to cure.
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A 2,200-sf dwelling has a cost of $195 per square foot, and a separate 400-sf garage costs $65 per square foot. These figures include all relevant cost components with no overlap. Excluding land, what is the total cost new of the improvements?
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