A cost service quotes a base for a different documented date and location. How should it be adapted?
Correct Answer
C) Apply supported date and location adjustments, without double counting.
Review the service’s date, location and coverage, then apply only supported necessary adjustments. A current locally calibrated base may need no additional multiplier; do not adjust twice. Remote construction is not automatically cheaper, and unit conversions depend on actual units.
Why This Is the Correct Answer
Option C is correct because building costs are constantly changing and differ by market, so a base quoted for another date and location must be brought to the subject's date and area with supported multipliers. The appraiser should verify what the data already includes so that no adjustment is applied twice.
Why the Other Options Are Wrong
Option A: Do not adjust a national base, because it is authoritative.
Option A says not to adjust a national base because it is authoritative. A published base still reflects a specific date and cost level, so it needs supported adjustments when the subject's date or location differs.
Option B: Deduct for a rural location, because remote construction is assumed to be cheaper.
Option B says to deduct for a rural location because remote construction is assumed cheaper. Remote construction is not automatically cheaper and can cost more because of travel, labor and material delivery, so any location adjustment needs support.
Option D: Convert the base to metric units before applying it.
Option D says to convert the base to metric units before applying it. Unit conversion depends on the units actually used and does nothing to address the date and location differences in the question.
When and Where
A cost base has a when and a where. Fix both with supported multipliers, and fix each only once.
How to use: Use this check whenever a cost-service figure comes from a different date or market.
Exam Tip
Prefer answers that call for supported adjustments and warn against double counting over answers that assume a fixed direction for location.
Common Mistakes to Avoid
- -Applying a local multiplier to a base already calibrated for that market
- -Assuming rural construction always costs less
- -Using an outdated cost base without a time adjustment
Concept Deep Dive
Analysis
This question tests how to adapt cost-service data to the subject's date and location. Building costs change over time and vary by area, so a base for another date and location needs supported adjustments. The appraiser must also avoid applying the same adjustment twice.
Background Knowledge
Cost manuals typically provide time multipliers to update costs and local multipliers to reflect regional cost differences. A base already calibrated to the current date and local market may need no further multiplier, so the appraiser reviews the service's coverage before adjusting.
Real-World Application
An appraiser pulls a base cost from a manual dated several months before the effective date. She applies the manual's current time multiplier and the local multiplier for the subject's county, after confirming the base was not already locally adjusted.
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An external influence has reduced the annual net income of the subject property by $21,600. Market data indicate an 8% capitalization rate for this income loss, and all other economic factors are unchanged. What is the capitalized loss to the whole property, before allocation between site and improvements?