Adding a second bathroom to an existing house costs $22,000; the same bathroom in new construction would have cost $14,000. The market pays $25,000 for it. How is the curable deficiency measured?
Correct Answer
C) $22,000 less $14,000, the excess of adding it late
Why this is correct: This describes functional obsolescence due to a deficiency (lack of a second bathroom). The cost to cure the deficiency is the extra cost incurred by adding it to an existing structure versus including it in original construction. This 'penalty' is the measure of the obsolescence: $22,000 (retrofit cost) - $14,000 (new construction cost) = $8,000. Why the other choices are wrong: $14,000 is the cost if it were built new, which is already included in the replacement cost new figure. $25,000 is the contributory value, which is greater than the cure cost, making it curable, but the obsolescence is measured by the cost penalty. $3,000 is the net gain ($25,000 - $22,000), not the measure of the deficiency. Exam tip: For a curable functional deficiency, the obsolescence is the excess cost of adding it later: Retrofit Cost - Cost if New.
Why This Is the Correct Answer
Why this is correct: This describes functional obsolescence due to a deficiency (lack of a second bathroom). The cost to cure the deficiency is the extra cost incurred by adding it to an existing structure versus including it in original construction. This 'penalty' is the measure of the obsolescence: $22,000 (retrofit cost) - $14,000 (new construction cost) = $8,000. Why the other choices are wrong: $14,000 is the cost if it were built new, which is already included in the replacement cost new figure. $25,000 is the contributory value, which is greater than the cure cost, making it curable, but the obsolescence is measured by the cost penalty. $3,000 is the net gain ($25,000 - $22,000), not the measure of the deficiency. Exam tip: For a curable functional deficiency, the obsolescence is the excess cost of adding it later: Retrofit Cost - Cost if New.
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