An appraiser applies 30% depreciation from age-life, then separately deducts a further 10% for the worn roof included in that ratio. The error is:
Correct Answer
C) Double-counting — the ratio already charged the roof's share
The stem expressly says the roof’s loss is already included in the 30% allowance. Deducting it again duplicates that same loss. Separate component deductions are possible under a properly defined nonoverlapping breakdown model; there is no universal ban on all ratios above 25%.
Why This Is the Correct Answer
Option C is correct because the 30% age-life ratio already includes the roof's share of loss. Deducting another 10% for the same roof charges that loss twice and understates value. To deduct the roof separately, the appraiser would need a ratio that excludes it.
Why the Other Options Are Wrong
Option A: Using any single depreciation ratio above twenty-five percent
Option A is wrong because there is no rule against a single depreciation ratio above twenty-five percent. Any supported ratio can be used; the error here is counting the roof twice.
Option B: Failing to depreciate the site as well
Option B is wrong because the site is not depreciated in the cost approach; site value is estimated separately as if vacant. Failing to depreciate the site is not an error.
Option D: Rounding the ratio to a whole number
Option D is wrong because rounding the ratio to a whole number is not the problem described. The error is the extra 10% deduction for a roof already included in the 30%.
One loss, one charge
Each loss gets charged once. If the overall ratio already covers an item, a separate deduction for it is a second charge.
How to use: Use this when a question combines an overall depreciation ratio with separate item deductions.
Exam Tip
Ask whether the separately deducted item is already inside the overall ratio. If it is, the answer is double counting.
Common Mistakes to Avoid
- -Deducting a component already included in an overall ratio
- -Believing depreciation ratios have a fixed maximum
- -Thinking site value should be depreciated
Concept Deep Dive
Analysis
This question tests recognizing double counting. The 30% age-life ratio already includes the worn roof, so a further 10% roof deduction charges the same loss twice. Separate component deductions work only when the overall ratio excludes those components.
Background Knowledge
Physical deterioration should be calculated separately for short-lived and long-lived components to avoid depreciating short-lived items twice. An overall age-life ratio covers all components it is applied to, so any separate deduction must come from a base that excludes them.
Real-World Application
A reviewer notices that an appraisal applies 30% age-life depreciation to the whole house and then deducts a worn roof on a separate line. The reviewer asks the appraiser to remove the roof from the age-life base or drop the extra deduction.
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