A curable deferred repair has a verified market penalty corresponding to its supported full current cure cost, and that loss is not already counted. Why use that cost evidence?
Correct Answer
C) It directly supports the stated repair-related penalty.
For the stipulated curable item whose market penalty is supported near the full effective-date cure cost, cost evidence directly informs the allowance. This is a stated causal finding, not a universal assertion that every repair bill equals loss. Avoid duplicating loss already measured by a blanket ratio.
Why This Is the Correct Answer
Option C is correct because the stem states that the verified market penalty corresponds to the supported full current cure cost. For a curable item, that cost evidence therefore directly supports the repair-related penalty, provided it is not already counted elsewhere.
Why the Other Options Are Wrong
Option A: Age-life cannot be calculated for an exterior component.
Option A claims age-life cannot be calculated for an exterior component. Age-life can be applied to exterior components; the reason to use cure cost here is that it matches the verified market penalty.
Option B: Appraiser convenience in gathering the data is the basis of value.
Option B says appraiser convenience in gathering the data is the basis of value. Value rests on market evidence, and ease of data collection does not justify a method.
Option D: A lender rule fixes repair penalties at invoice cost.
Option D says a lender rule fixes repair penalties at invoice cost. Depreciation is a market-based measure, and no lender rule sets the value loss at an invoice amount.
Curable Fix, Cost Measures Loss
When a repair is worth doing and the market penalty matches its cost, the cure cost is the loss, counted once.
How to use: Use this to justify cost-to-cure measures for deferred maintenance.
Exam Tip
Choose the answer tied to market support for the penalty, not one based on convenience or an outside rule.
Common Mistakes to Avoid
- -Assuming any repair invoice equals the value loss
- -Counting deferred maintenance in both cure cost and an age-life ratio
- -Justifying a method by convenience instead of market evidence
Concept Deep Dive
Analysis
This question tests why cost to cure is appropriate evidence for curable deferred maintenance. When the market penalty corresponds to the supported full current cure cost and the loss is not already counted, the cost evidence directly measures the loss.
Background Knowledge
Curable physical deterioration, also called deferred maintenance, exists when the value added by a repair equals or exceeds its cost. For such items, the cost to cure as of the effective date is commonly used to measure the loss. The appraiser must avoid charging the same loss again through a blanket depreciation ratio.
Real-World Application
A house needs exterior painting, and local sales show buyers discount homes by about the cost of the paint job. The appraiser deducts the current painting cost as curable physical deterioration and excludes paint from her other depreciation.
More Cost Approach Questions
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Previous Question
A supported land indication WITH an access attribute is $1,200,000. Market evidence explicitly states this equals 115% of otherwise identical land WITHOUT that attribute. The subject lacks it. What without-attribute land indication follows, to the nearest dollar? No conclusion about improvement loss is requested.
Next Question
An appraiser separates the improvements into two component groups that do not overlap. The long-lived group has a cost new of $500,000, an effective age of 10 years and a total life of 50 years. The short-lived group has a cost new of $80,000, an effective age of 4 years and a total life of 16 years. Using straight-line age-life depreciation with no salvage value, and with no site value or other losses, what is the combined depreciated cost?