Building cost new is $410,000 and total building depreciation $90,000. Separate site improvements are already valued as-is at $35,000 and are not in the building figures. Add supported vacant-site value $100,000, which excludes those improvements. What total results?
Correct Answer
C) $455,000
410000−90000+35000+100000 = 455000. Common errors: leaving out the vacant-site value gives $355,000; leaving out the as-is site improvements gives $420,000; adding the building depreciation instead of deducting it gives $635,000.
Why This Is the Correct Answer
Option C is correct because the depreciated building is $410,000 - $90,000 = $320,000. Adding $35,000 of as-is site improvements and the $100,000 vacant-site value gives $455,000.
Why the Other Options Are Wrong
Option A: $355,000
Option A, $355,000, leaves out the vacant-site value: $410,000 - $90,000 + $35,000 = $355,000. Adding the $100,000 site gives $455,000.
Option B: $420,000
Option B, $420,000, leaves out the as-is site improvements: $410,000 - $90,000 + $100,000 = $420,000. Adding the $35,000 site improvements gives $455,000.
Option D: $635,000
Option D, $635,000, adds the building depreciation instead of deducting it: $410,000 + $90,000 + $35,000 + $100,000 = $635,000. The correct result is $410,000 - $90,000 + $35,000 + $100,000 = $455,000.
Three Boxes, One Total
Picture three boxes: depreciated building, as-is site extras, vacant land. Fill each once and add them.
How to use: Use this picture when site improvements and land are listed separately.
Exam Tip
When the stem says the site value excludes the site improvements, both must be added.
Common Mistakes to Avoid
- -Omitting site improvements because the land value is included
- -Adding building depreciation instead of subtracting it
- -Leaving out the vacant-site value
Concept Deep Dive
Analysis
This question tests a cost summation with depreciated building cost, separately valued site improvements and vacant-site value. Deduct the building depreciation, then add the site improvements and land, since neither is included in the building figures.
Background Knowledge
The cost approach summary separates the dwelling, the as-is site improvements and the site value. Because the vacant-site value excludes the site improvements, both are added without double counting.
Real-World Application
An appraiser valuing a rural home lists a well, septic system and driveway as site improvements at their as-is contribution. She adds them to the depreciated dwelling cost and a vacant-land value from acreage sales.
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?
People Also Study
Real Estate Market
13.6% of exam
Property Description
11.8% of exam
Land or Site Valuation
4.5% of exam
Sales Comparison Approach
16.4% of exam
Income Approach
8.2% of exam
Previous Question
Improvement cost new is $485,000. Separately supported improvement depreciation deductions of $97,000 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?
Next Question
The subject is a dwelling next to a new industrial use. Paired sales show the influence reduces total property value by $50,000, of which $12,000 is attributable to the site, and the $140,000 site value already reflects that site loss. Improvement cost new is $650,000, effective age is 20 years and total economic life is 50 years. The age-life estimate does not capture the influence. What value does the cost approach indicate?