A property's as-if-cured value is $916,000. Independent market analysis indicates a total value loss of $30,000 from its present repair condition, including all relevant cost, time and risk effects. The as-if-cured value does not reflect this loss, and no other deductions apply. What is the as-is value?
Correct Answer
B) $886,000
As-is=$916,000−$30,000=$886,000. The $30,000 is the total market value loss from the present condition. In an actual appraisal, repair cost alone does not prove an equal value deduction, and a value already reflecting the condition must not be reduced for it again. Common errors: adding the loss instead of deducting it gives $946,000; not deducting the loss gives $916,000; reporting only the loss gives $30,000.
Why This Is the Correct Answer
Option B is correct because the as-is value equals the as-if-cured value minus the supported condition loss: $916,000 - $30,000 = $886,000. The question confirms the loss is not already reflected and no other deductions apply.
Why the Other Options Are Wrong
Option A: $30,000
Option A, $30,000, is only the condition loss, not the property's value. The as-is value is $916,000 - $30,000 = $886,000.
Option C: $916,000
Option C, $916,000, is the as-if-cured value with no deduction for the present repair condition. Since the supported loss applies, the as-is value is $916,000 - $30,000 = $886,000.
Option D: $946,000
Option D, $946,000, comes from adding the loss ($916,000 + $30,000) instead of deducting it. A condition loss lowers value, so the as-is value is $916,000 - $30,000 = $886,000.
Cured minus loss equals as-is
Start from the fixed-up value and take away what the market says the current condition costs in value.
How to use: Use this when a question gives an as-if-cured value and a supported condition loss and asks for as-is value.
Exam Tip
Check whether the loss is already reflected in the starting figure; if it is not, deduct it once.
Common Mistakes to Avoid
- -Adding a condition loss instead of deducting it
- -Equating repair cost with value loss without market support
- -Deducting a loss that is already reflected in the starting value
Concept Deep Dive
Analysis
This question tests converting an as-if-cured value to an as-is value by deducting a market-supported loss for present condition. The key is that the loss is the total market value loss and is not already reflected in the as-if-cured figure, so a single deduction is appropriate.
Background Knowledge
An as-is value reflects the property in its current condition, while an as-if-cured or as-repaired value assumes deficiencies are corrected. The difference should be based on market-supported value loss, which can include cost, time and risk, and repair cost alone does not necessarily equal the value deduction.
Real-World Application
An appraiser values a house needing roof and siding repairs. Comparable sales support a $916,000 value if repaired, and paired data and buyer behavior support a total $30,000 discount for the current condition, so the appraiser reports an as-is value of $886,000.
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