A superadequate internal volume creates verified excess heating cost that is not reflected in another loss allowance. What additional component may need valuation?
Correct Answer
D) The supported recurring excess-cost burden.
A market-supported excess operating burden can add a functional loss component beyond unsupported construction cost, but avoid overlap and consider cure economics. Not every overbuilt feature necessarily has both penalties. Higher heating alone does not prove a site premium or external cause.
Why This Is the Correct Answer
Option D is correct because a superadequacy can be measured by the extra cost of ownership it creates, less any value it adds. Verified excess heating cost from the oversized volume is such a burden, and since it is not reflected in another allowance, it may need separate valuation. The appraiser should avoid overlap with other loss estimates and consider cure economics.
Why the Other Options Are Wrong
Option A: Physical wear caused by the higher heating bill.
Option A calls it physical wear caused by the higher heating bill. A higher utility bill does not physically wear the building; the cost comes from the design, so it is functional.
Option B: An off-site external cause despite the internal design source.
Option B calls it an off-site external cause despite the internal design source. The excess volume is part of the building's own design, so the loss is functional, not external.
Option C: An automatic site premium equal to all heating costs.
Option C proposes an automatic site premium equal to all heating costs. Extra heating cost is a burden on ownership, not a premium, and it has no logical link to site value.
Too big costs twice
An oversized feature can cost more to build and more to run; the running cost may be its own loss if not counted elsewhere.
How to use: Use this when a superadequacy question mentions ongoing operating costs.
Exam Tip
Classify the source first: an internal design feature is functional even when its effect shows up in operating costs. Look for the answer that values the supported recurring burden.
Common Mistakes to Avoid
- -Treating excess operating cost as physical deterioration
- -Classifying an internal design problem as external obsolescence
- -Counting the same superadequacy loss twice
Concept Deep Dive
Analysis
This question tests measuring a superadequacy that also raises operating costs. A superadequate design can cause loss through its excess cost and also through extra ownership costs such as heating. When the excess heating cost is verified and not already counted elsewhere, the recurring burden may need to be valued as part of functional obsolescence.
Background Knowledge
A superadequacy is a component or design feature whose cost exceeds its contribution to value. Its loss can include the excess construction cost and, where supported, the capitalized extra cost of ownership such as higher utilities, less any value it adds. Appraisers avoid counting the same effect twice when combining these components.
Real-World Application
An appraiser values a house with extremely high vaulted ceilings throughout, and utility records show heating bills well above those of similar homes. Because buyers discount for the ongoing expense, the appraiser estimates the capitalized excess operating cost as part of functional obsolescence.
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?
A new feature in the improvements has a current cost of $45,000 and a market contribution of $18,000. The entire difference is due to superadequacy, with no physical or external loss and no overlap. What is the loss from the superadequacy?
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?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Income Approach
8.2% of exam
Previous Question
Improvement cost new is $520,000, and a supported 75% good factor expresses all remaining improvement contribution after applicable loss. Add supported site $200,000. What total indication results?
Next Question
Dwelling 2,050 sf costs $178/sf. Separate detached garage cost $34,000 and separate site-improvement cost $21,500 are not counted in that rate. Land is excluded. What improvement cost new results?