Market analysis confirms a house’s excess size is overbuilt for its competitive demand and its excess cost is not reflected in contributory value. What functional condition is identified?
Correct Answer
B) A superadequacy relative to the stated market.
A materially larger house is not automatically obsolete. The stipulated market evidence must show unsupported excess utility/cost. Here a supported excess-cost feature not warranted by demand is a superadequacy; physical wear and off-site effects are different causes.
Why This Is the Correct Answer
Option B is correct because a superadequacy is a property component in excess of market standards that does not contribute its cost to value. The market evidence shows the house is overbuilt for its demand and the excess cost is not reflected in contributory value.
Why the Other Options Are Wrong
Option A: Physical deterioration from the added floor area.
Option A calls it physical deterioration from the added floor area. Physical deterioration is wear and decay, and extra floor area is a design and market-fit issue, not wear.
Option C: External obsolescence caused by smaller neighboring houses.
Option C calls it external obsolescence caused by smaller neighboring houses. The issue is the subject's own excess size relative to market demand, which is functional, not a negative influence from outside the property.
Option D: An inadequacy relative to the stated market.
Option D calls it an inadequacy. An inadequacy is a shortfall below market standards, while this house has more size than the market supports, which is an excess.
Too Much Is Super
Super means over: a superadequacy is more than the market wants. Inadequacy means under: less than the market expects.
How to use: Use this when deciding whether a functional problem is an excess or a shortfall.
Exam Tip
Match the direction of the problem: excess points to superadequacy and shortfall points to inadequacy or deficiency.
Common Mistakes to Avoid
- -Confusing superadequacy with inadequacy
- -Blaming neighboring houses and calling it external obsolescence
- -Assuming a larger house is automatically obsolete without market evidence
Concept Deep Dive
Analysis
This question tests recognition of a superadequacy. Market analysis shows the extra size exceeds what competitive demand supports and its extra cost is not reflected in contributory value. A feature in excess of market standards that does not contribute its cost is a superadequacy, a form of functional obsolescence.
Background Knowledge
Functional obsolescence includes both deficiencies (too little) and superadequacies (too much) relative to market standards. A larger house is not automatically obsolete; market evidence must show the excess cost is not recovered in value.
Real-World Application
An appraiser values a 6,000-square-foot custom home in a neighborhood of 2,000-square-foot homes. Sales show buyers pay little for the extra space, so she measures the unrecovered cost as a superadequacy.
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?
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Which scenario most strongly supports giving the cost approach substantial weight?
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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?
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Previous Question
Direct improvement costs are $315,000, indirect costs are $47,000 and an additional incentive is $36,000, with no overlap among them. Straight-line depreciation is 12/60 of their total, with no other loss, and the site value is $198,000. What is the indicated value by the cost approach?
Next Question
Improvement base costs total $500,000 and explicitly exclude entrepreneurial incentive. Add a supported incentive 10% of that base. Total depreciation $60,000 is expressly measured for the full resulting cost including incentive. Add site $200,000. What indication results?