A property has a 1,200 sq ft heated indoor pool room in a market where no comparable has one and pool rooms show no measurable premium. The excess cost is:
Correct Answer
B) Treated as functional obsolescence from superadequacy
Why this is correct: Superadequacy is a form of functional obsolescence where an improvement is overly elaborate or costly for its market. The heated pool room costs more to build than the value it adds (which is zero, as the market shows no premium). This excess cost is a loss in value the moment it is built. Why the other choices are wrong: "Recovered fully through the improvement's contributory value" is wrong because the market evidence shows no contributory value. "Treated as functional obsolescence from superadequacy" is correct. "Added to the site value as a special-use enhancement" is wrong; site value is for land, not over-improvements. "Excluded from cost new and therefore never deducted" is wrong; under reproduction cost, it would be included and then deducted as obsolescence. Exam tip: Superadequacy = cost > value. Look for features the market does not pay for.
Why This Is the Correct Answer
Why this is correct: Superadequacy is a form of functional obsolescence where an improvement is overly elaborate or costly for its market. The heated pool room costs more to build than the value it adds (which is zero, as the market shows no premium). This excess cost is a loss in value the moment it is built. Why the other choices are wrong: "Recovered fully through the improvement's contributory value" is wrong because the market evidence shows no contributory value. "Treated as functional obsolescence from superadequacy" is correct. "Added to the site value as a special-use enhancement" is wrong; site value is for land, not over-improvements. "Excluded from cost new and therefore never deducted" is wrong; under reproduction cost, it would be included and then deducted as obsolescence. Exam tip: Superadequacy = cost > value. Look for features the market does not pay for.
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?
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The cost approach is generally most reliable for which property?
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A 45-year-old office building has undergone extensive system upgrades (HVAC, electrical, fire suppression) and interior modernization, resulting in strong tenant demand and rental rates exceeding those of newer buildings in the area. The appraiser estimates its total economic life at 65 years. Which statement best reflects the likely relationship among its chronological age, effective age, and remaining economic life?