A superadequacy under a reproduction cost basis is measured including:
Correct Answer
C) Its excess cost, less any contribution, adjusted for depreciation charged
Why this is correct: Under reproduction cost (an exact duplicate), the superadequate feature's full cost is included in the cost new. The deduction for functional obsolescence must therefore remove the excess cost (the amount not supported by market value), while also accounting for any physical depreciation already charged on that feature. Why the other choices are wrong: Only the annual cost of operating the feature is wrong; operating costs are considered but the primary measure is excess capital cost. Its full original installed cost with no further adjustment is wrong; this would overstate the obsolescence if the feature has some value or has depreciated. Nothing, since superadequacies add value is wrong; by definition, a superadequacy costs more than it contributes. Exam tip: Reproduction cost includes it, so you must deduct the excess; replacement cost excludes it from the start.
Why This Is the Correct Answer
Why this is correct: Under reproduction cost (an exact duplicate), the superadequate feature's full cost is included in the cost new. The deduction for functional obsolescence must therefore remove the excess cost (the amount not supported by market value), while also accounting for any physical depreciation already charged on that feature. Why the other choices are wrong: Only the annual cost of operating the feature is wrong; operating costs are considered but the primary measure is excess capital cost. Its full original installed cost with no further adjustment is wrong; this would overstate the obsolescence if the feature has some value or has depreciated. Nothing, since superadequacies add value is wrong; by definition, a superadequacy costs more than it contributes. Exam tip: Reproduction cost includes it, so you must deduct the excess; replacement cost excludes it from the start.
More cost-approach Questions
In a cost approach for a proposed building, the appropriate cost basis is generally:
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Which event would RAISE a building's effective age relative to last year's estimate?
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In developing an age-life depreciation estimate, an appraiser assigns an effective age of 16 years and a total economic life of 40 years. Later, the appraiser discovers that comparable properties in the same submarket have recently sold with effective ages averaging 12 years and total economic lives averaging 45 years — and those sales exhibited superior energy efficiency and adaptive reuse features. What is the appraiser’s USPAP-compliant obligation regarding the original effective age estimate?
The age-life method expresses depreciation as:
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