Which fact supports treating an external loss as temporary?
Correct Answer
B) Market evidence shows the condition will reverse
External loss can be temporary when supported expectations indicate a reversible cycle or temporary influence. Even a longstanding location condition may change, and an economic influence may persist. Duration must be supported rather than inferred solely from physical-versus-economic labels.
Why This Is the Correct Answer
Option B is correct because market evidence that the outside condition will reverse supports treating the external loss as temporary. External loss can be temporary when supported expectations indicate a reversible cycle or temporary influence. The duration conclusion rests on that market support rather than on an assumption.
Why the Other Options Are Wrong
Option A: The deficiency is an outdated interior floor plan
Option A cites an outdated interior floor plan. That is a design problem within the property, which is functional obsolescence, so it says nothing about whether an external loss is temporary.
Option C: The owner has deferred routine exterior painting
Option C cites deferred routine exterior painting. That is physical deterioration of the property, not an external influence, so it does not bear on the duration of an external loss.
Option D: The adverse outside condition is expected to persist
Option D states that the adverse outside condition is expected to persist. Evidence of persistence supports treating the external loss as lasting, which is the opposite of temporary.
Temporary needs evidence of reversal
An external loss is treated as temporary only when evidence shows the outside condition is expected to go away. No reversal evidence, no temporary conclusion.
How to use: Use this to screen answer choices about the duration of external obsolescence.
Exam Tip
Eliminate choices describing interior design or physical condition first, since they are not external. Then pick the one supported by market evidence of reversal.
Common Mistakes to Avoid
- -Assuming all economic external loss is temporary
- -Confusing physical or functional items with external influences
- -Concluding duration without market support
Concept Deep Dive
Analysis
This question tests what evidence justifies treating external obsolescence as temporary. The duration of an external loss must be supported by market expectations rather than assumed from labels. Only one option offers evidence that the outside condition is expected to reverse, and two options are not external at all.
Background Knowledge
External obsolescence is loss of value from influences outside the property, such as economic conditions or nearby land uses. Some external influences are temporary, such as a market downturn expected to recover, while others may persist. Appraisers support conclusions about duration with market evidence rather than inferring them solely from the type of influence.
Real-World Application
A road construction project temporarily reduces access to a residential subdivision and slows home sales there. Market data and the published project schedule indicate access and prices should recover once construction ends. The appraiser treats the resulting external loss as temporary and explains the support for that conclusion.
More Cost Approach Questions
Why can equivalent-utility replacement cost be useful for an obsolete improvement?
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