External obsolescence may be temporary when it results from:
Correct Answer
B) Economic conditions that could later reverse
Why this is correct: External obsolescence can be temporary when caused by cyclical economic conditions (e.g., a local recession, temporary oversupply) that have the potential to improve, unlike permanent physical nuisances. Why the other choices are wrong: Permanent physical features of the location is wrong; these cause permanent external obsolescence. The property's own design limitations is wrong; that describes functional obsolescence. Deferred maintenance by the owner is wrong; that is physical deterioration. Exam tip: Temporary external obsolescence is often economic; permanent is often physical (e.g., location next to a landfill).
Why This Is the Correct Answer
Why this is correct: External obsolescence can be temporary when caused by cyclical economic conditions (e.g., a local recession, temporary oversupply) that have the potential to improve, unlike permanent physical nuisances. Why the other choices are wrong: Permanent physical features of the location is wrong; these cause permanent external obsolescence. The property's own design limitations is wrong; that describes functional obsolescence. Deferred maintenance by the owner is wrong; that is physical deterioration. Exam tip: Temporary external obsolescence is often economic; permanent is often physical (e.g., location next to a landfill).
More Cost Approach Questions
In a cost approach for a proposed building, the appropriate cost basis is generally:
A warehouse cost $210,000 to build when the cost index stood at 105. The index is now 210. Its indicated current cost is:
The age-life method expresses depreciation as:
Market extraction of depreciation is limited by the fact that it:
Functional obsolescence caused by a deficiency is measured as curable when:
Curable physical deterioration is measured at cost to cure because:
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A house has three bedrooms sharing one bathroom, and adding a second bath is economically justified. This is:
Direct costs in a construction budget include:
An appraiser writes that a 40-year-old house has an effective age of 10 but describes original wiring, original kitchen and a 25-year-old roof. The report's problem is:
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