Improvement cost new is $560,000 and a supported 78% good factor includes the effect of all improvement loss. Add supported site $138,000. What total indication results?
Correct Answer
C) $574,800
560000×0.78+138000 = 574800. Common errors: leaving out the site value gives $436,800; applying the depreciation share (22%) instead of the 78% good factor gives $261,200; not applying the good factor gives $698,000.
Why This Is the Correct Answer
Option C is correct because $560,000 x 0.78 = $436,800 depreciated improvement value, and adding the $138,000 site gives $574,800. The 78% good factor already reflects all improvement loss, so no further deduction is needed.
Why the Other Options Are Wrong
Option A: $261,200
Option A, $261,200, comes from $560,000 x 0.22 + $138,000, applying the 22% depreciation share instead of the 78% good factor. The correct calculation is $560,000 x 0.78 + $138,000 = $574,800.
Option B: $436,800
Option B, $436,800, is $560,000 x 0.78, the depreciated improvements without the $138,000 site value. Adding the site gives $574,800.
Option D: $698,000
Option D, $698,000, is $560,000 + $138,000, which skips the 78% good factor entirely. Applying it gives $436,800 + $138,000 = $574,800.
Good means what is left
Percent good is the share still standing, so multiply cost new by it directly, then add the land.
How to use: Use this to avoid confusing percent good with percent depreciated.
Exam Tip
Note whether a stated percentage is depreciation or percent good; multiplying by the wrong one is a common trap.
Common Mistakes to Avoid
- -Multiplying by the depreciation percentage when a percent good is given
- -Forgetting to add site value
- -Deducting depreciation again after applying percent good
Concept Deep Dive
Analysis
This question tests use of a percent good factor in the cost approach. Percent good is the complement of depreciation, so multiplying cost new by 78% gives the depreciated improvement value directly. Site value is then added.
Background Knowledge
Percent good is the complement of depreciation measured as a percentage. Multiplying cost new by percent good gives the depreciated cost of the improvements, to which site value is added for a cost approach indication.
Real-World Application
A cost service gives an appraiser a supported percent good for a building of similar age and condition. The appraiser multiplies cost new by that factor and adds the land value from vacant land sales.
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Previous Question
Dwelling 2,050 sf costs $178/sf. Separate detached garage cost $34,000 and separate site-improvement cost $21,500 are not counted in that rate. Land is excluded. What improvement cost new results?
Next Question
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?