An appraiser assigns a 15-year effective age to a 15-year-old home in average condition. This suggests:
Correct Answer
A) The home has aged at a typical rate for its market
The stipulated supported equality of effective and chronological ages is consistent with typical effective aging. It is not proof of a unique maintenance history, nor does it guarantee an exact depreciation percentage. Renovation and neglect effects require actual condition-and-utility analysis.
Why This Is the Correct Answer
Option A is correct because effective age is the age indicated by a property's condition and utility. An effective age equal to the 15-year actual age, with average condition, is consistent with typical aging for that market.
Why the Other Options Are Wrong
Option B: The home has been extensively renovated
Option B, that the home has been extensively renovated, is wrong because significant renovation would usually lower effective age below actual age, not leave them equal.
Option C: The home has been badly neglected
Option C, that the home has been badly neglected, is wrong because heavy neglect would usually push effective age above actual age, and the home is described as average condition.
Option D: The appraiser has made a computational error somewhere
Option D, that the appraiser made a computational error, is wrong because effective age equaling actual age is a normal, reasonable conclusion for a typically maintained home.
Equal ages, typical aging
Effective younger than actual suggests updating; older suggests neglect; equal suggests typical aging.
How to use: Use this comparison to interpret any effective age versus actual age question.
Exam Tip
Compare effective age with actual age and connect the difference to condition. Equal ages with average condition point to typical aging.
Common Mistakes to Avoid
- -Confusing effective age with actual age
- -Assuming equal ages indicate an error
- -Thinking renovation raises effective age
Concept Deep Dive
Analysis
This question tests the relationship between effective age and actual age. Effective age reflects condition and utility, while actual age is chronological. When they are equal for a home in average condition, the home has aged at a typical rate.
Background Knowledge
Actual age is the number of years since construction, while effective age is the age indicated by condition and utility. Better than typical upkeep or renovation tends to lower effective age, and neglect tends to raise it. Effective age is used in the age-life method of estimating depreciation.
Real-World Application
An appraiser inspects a 15-year-old home with original but well-kept finishes typical of the area. The appraiser assigns an effective age of 15 years, reflecting normal wear for the market.
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Previous Question
A retrofit to cure a deficiency would cost $28,000 today and add $31,000 to value. The current reproduction cost of the improvements already includes $17,000, at current prices, for the equivalent item installed during new construction. What deduction for the deficiency keeps that amount from being counted twice?
Next Question
The subject improvements have a current cost new of $650,000, an effective age of 16 years and a total economic life of 80 years. Depreciation is by the straight-line age-life method, with no salvage value or other deductions. The site value of $190,000 already reflects any site influences. What is the total indicated value, including the site?