New comparable rehabilitation evidence may bear on a deteriorated subject’s remaining utility. What is appropriate before retaining its effective-age conclusion?
Correct Answer
B) Reevaluate the evidence, as-is condition and depreciation assumptions, and revise only if supported.
New rehabilitation evidence calls for reassessing comparability, current as-is condition, cure costs and remaining utility. It does not mandate a lower effective age before the subject is rehabilitated, or allow offsetting an unsupported age by changing total life. Effective age must reflect the subject’s actual condition and utility as of the effective date.
Why This Is the Correct Answer
Option B is correct because effective age is the age indicated by the condition and utility of the property. New rehabilitation evidence calls for reevaluating comparability, the subject's as-is condition and the depreciation assumptions, then revising only if the analysis supports a change.
Why the Other Options Are Wrong
Option A: Retain it solely because every physical judgment is objective fact.
Option A is wrong because it would retain the conclusion on the claim that every physical judgment is objective fact. Effective age is a supported judgment that should be reconsidered when relevant new evidence appears.
Option C: Automatically lower age regardless of unrepaired subject condition.
Option C is wrong because it would lower the effective age regardless of the subject's unrepaired condition. Rehabilitation of comparables does not change the condition of a subject that has not been rehabilitated.
Option D: Change the total economic life so that the desired remaining-life result stays the same as before.
Option D is wrong because changing total economic life to keep the desired remaining-life result the same works backward from a target. Each estimate must be supported on its own, not adjusted to offset another.
Reweigh, then revise if supported
New evidence means you reweigh your conclusion; you change it only if the evidence supports a change.
How to use: Use this principle when a question asks how to respond to new evidence that bears on a prior estimate.
Exam Tip
Prefer answers that reevaluate and revise only when supported; options that refuse to reconsider or change results to reach a target are poor practice.
Common Mistakes to Avoid
- -Lowering the subject's effective age because comparables were renovated
- -Refusing to reconsider an earlier estimate when new evidence appears
- -Adjusting total economic life to preserve a desired result
Concept Deep Dive
Analysis
This question tests appraiser judgment when new evidence bears on an earlier conclusion. Effective age reflects the subject's actual condition and utility, so new rehabilitation evidence should prompt a fresh look, not an automatic change or a refusal to reconsider. The appraiser revises the conclusion only if the evidence supports it.
Background Knowledge
Effective age is an estimate based on the condition and utility of the improvement as of the effective date, and it can differ from actual age. Evidence about rehabilitated comparables may inform remaining utility and cure costs, but the subject's own condition governs its effective age. Credible analysis requires revisiting conclusions when significant new evidence appears.
Real-World Application
While appraising a run-down duplex, an appraiser learns that several similar duplexes nearby were recently rehabilitated and sold. The appraiser reviews those sales and cure costs but keeps the subject's effective age tied to its current unrepaired condition, adjusting only what the evidence supports.
More Cost Approach Questions
Why can equivalent-utility replacement cost be useful for an obsolete improvement?
An appraiser estimates the current replacement cost new of the improvements at $890,000, accrued depreciation from all causes at $170,000, and land value at $325,000. All necessary cost components and depreciation are included in those amounts. What is the indicated property value?
Improvement cost new is $595,000. Separately supported improvement depreciation deductions of $48,000, $27,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $155,000, already reflecting any site losses. What total indicated value results?
What best supports a claimed loss from a bathroom-layout deficiency?
Improvement cost new is $1,850,000. Separately supported improvement depreciation deductions of $310,000, $620,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
Which scenario most strongly supports giving the cost approach substantial weight?
A cost total $650,000 explicitly includes $40,000 of non-realty FF&E outside the appraised real-property interest. Exclude it. Supported realty-only total depreciation is $55,000. Add site $200,000, with no overlap. What real-property cost indication results?
A 2,200-sf dwelling costs $200 per square foot, and a separate 400-sf garage costs $75 per square foot. These costs are complete and do not overlap. Both have an effective age of 15 years and a total life of 50 years, with straight-line depreciation and no salvage value. No site value or other loss is involved. What is the combined depreciated cost of the dwelling and garage?
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An external influence causes an annual net income loss of $9,600. The capitalization rate for the loss is 8%, and no other economic factors change. What is the indicated loss in value of the whole property, before allocation between site and improvements?
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Previous Question
Total PHYSICAL depreciation is $62,000, consisting only of curable physical $9,000, short-lived incurable $14,000, and a remaining long-lived incurable component. Functional and external loss are excluded. What is the remaining component?
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An appraiser estimates hard costs of $420,000 and separate soft costs of $50,000, which together include all required improvement costs. Total depreciation is estimated at 30% of their sum, and the site is valued at $220,000. What total value does the cost approach indicate?