An appraiser gives the cost approach little weight on a sixty-year-old house. What is the most defensible reason?
Correct Answer
C) Accrued depreciation cannot be measured reliably
Why this is correct: For a sixty-year-old house, accrued depreciation (physical, functional, external) is often large and difficult to measure precisely. This uncertainty makes the cost approach less reliable, justifying giving it little weight. Why the other choices are wrong: The cost approach may not be used on older homes is false; it can be developed but may be unreliable. The client asked that it be left out is not a defensible analytical reason; the appraiser must justify scope decisions. Cost figures are unavailable for older construction is generally untrue; cost services provide historical cost data. Exam tip: The cost approach weakens with age due to depreciation estimation difficulty.
Why This Is the Correct Answer
Why this is correct: For a sixty-year-old house, accrued depreciation (physical, functional, external) is often large and difficult to measure precisely. This uncertainty makes the cost approach less reliable, justifying giving it little weight. Why the other choices are wrong: The cost approach may not be used on older homes is false; it can be developed but may be unreliable. The client asked that it be left out is not a defensible analytical reason; the appraiser must justify scope decisions. Cost figures are unavailable for older construction is generally untrue; cost services provide historical cost data. Exam tip: The cost approach weakens with age due to depreciation estimation difficulty.
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