Why are many external influences not curable by a subject-property renovation?
Correct Answer
D) Their off-site cause is beyond the individual owner’s feasible control.
The cause is generally outside the individual owner’s control and may not be remedied by changing the subject improvement. That explains usual limited curability; it does not make every external loss permanent or every mitigation impossible. Age and a supposed code prohibition are not defining conditions.
Why This Is the Correct Answer
Option D is correct because external obsolescence comes from causes outside the property that are usually beyond the power of any single owner to influence, and it cannot be cured by changing the subject improvement. This explains why it is usually treated as incurable, though not every external loss is permanent.
Why the Other Options Are Wrong
Option A: A cure bill for the influence exceeds the entire property value.
Option A says a cure bill exceeds the entire property value. That is not the reason; external problems are usually incurable because their cause is off-site and outside the owner's control, not because of a cost comparison with total value.
Option B: External influences apply to buildings older than 50 years.
Option B says external influences apply to buildings older than 50 years. External obsolescence is not tied to building age; it can affect new and old buildings alike.
Option C: Building codes prohibit owners from correcting external problems.
Option C says building codes prohibit owners from correcting external problems. No such code rule defines external obsolescence; the owner simply lacks control over the off-site cause.
Outside cause, outside control
External obsolescence starts outside the lot line, so the owner usually cannot fix it by working on the house.
How to use: Use this to explain why external obsolescence is usually incurable.
Exam Tip
Tie external obsolescence to off-site causes and owner control, not to building age or code restrictions.
Common Mistakes to Avoid
- -Linking external obsolescence to building age
- -Assuming renovations can cure external problems
- -Treating every external loss as permanent
Concept Deep Dive
Analysis
This question tests why external obsolescence is usually considered incurable by the owner. The cause lies outside the property, such as market or neighborhood conditions, so changing the subject building does not remove it. Other factors like age or codes do not define curability here.
Background Knowledge
External obsolescence is a loss in value caused by factors outside the property, such as market conditions, nearby land uses or economic changes. These factors usually affect more than one property and cannot be controlled by an individual owner, so the loss is generally treated as incurable.
Real-World Application
A new landfill opens near a residential neighborhood, and home values decline. Owners can renovate their houses, but that does not remove the landfill's effect, so the appraiser treats the loss as external 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?
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A building has two wings that do not overlap. The unrebuilt wing has a cost new of $480,000, an effective age of 25 years and a total life of 50 years, and is depreciated by the age-life method. The rebuilt wing has a cost new of $320,000 and no depreciation. The site is valued at $175,000. No other physical, functional, external or completion effects apply. What value does the cost approach indicate?
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A dwelling construction subtotal is 2,400 sf×$145/sf. Separate garage and sitework subtotals are $28,000 and $14,000, and none overlap. What sum of these stated cost components results? No statement is made about whether a separately supported entrepreneurial incentive is embedded.