Which loss is physical deterioration?
Correct Answer
B) Supported value loss from wear, damage or the elements.
Physical deterioration concerns wear, damage or natural forces affecting property condition. Functional and external causes are different. Economic curability depends on full costs and benefits, not whether an item is merely tangible or old.
Why This Is the Correct Answer
Option B is correct because physical deterioration is a loss in value due to use or the forces of nature, which includes wear, damage and exposure to the elements. The option also specifies that the loss is supported, which fits an appraisal measure of depreciation.
Why the Other Options Are Wrong
Option A: Supported value loss from an external employment decline.
Option A is wrong because a value loss from an external employment decline is caused by conditions outside the property. That is external obsolescence, not physical deterioration.
Option C: Supported utility loss from a sound but inadequate layout.
Option C is wrong because a utility loss from a sound but inadequate layout stems from the property's design, not from wear or damage. That is functional obsolescence.
Option D: A tax depreciation deduction without any market loss evidence.
Option D is wrong because a tax depreciation deduction with no market loss evidence is an accounting or tax figure. Appraisal depreciation is a supported loss in value, and this option shows no physical cause or market loss.
Wear, tear and weather
Physical deterioration comes from wear, tear and weather acting on the improvement. Design problems are functional, and outside influences are external.
How to use: Use this phrase to sort a stated loss by its cause before choosing a depreciation category.
Exam Tip
Identify the cause named in each option first. Only causes tied to use, damage or natural forces fit physical deterioration.
Common Mistakes to Avoid
- -Labeling a layout or design problem as physical deterioration
- -Using tax depreciation as evidence of market value loss
- -Treating a regional employment decline as physical wear
Concept Deep Dive
Analysis
This question tests whether you can identify physical deterioration by its cause. Ask what produced the loss: wear, damage, use or the elements point to physical deterioration. Loss from outside economic conditions is external, loss from design is functional, and tax figures are not market evidence.
Background Knowledge
Appraisal depreciation is divided into physical deterioration, functional obsolescence and external obsolescence. Physical deterioration arises from use, wear, damage and natural forces affecting the condition of the improvement. Whether an item is economically curable depends on comparing the full cost to cure with the value benefit, not on how old or tangible it is.
Real-World Application
An appraiser inspects a house with a worn roof, peeling exterior paint and storm-damaged gutters. These items are recorded as physical deterioration, while a nearby plant closure that reduced demand in the area would be analyzed separately as external obsolescence.
More Cost Approach Questions
Which stated cause of supported value loss is external?
Improvement cost new is $450,000. Separately supported improvement depreciation deductions of $45,000, $25,000, $15,000 are expressly nonoverlapping and not already excluded from cost new. Add supported site value of $125,000, already reflecting any site losses. What total indicated value results?
Which two depreciation categories may each be classified as curable or incurable by comparing the cost to remedy a deficiency with the value gained?
Improvement cost new is $800,000. Separately supported improvement depreciation deductions of $120,000, $80,000, $40,000 are expressly nonoverlapping and not already excluded from cost new. No site is included. What depreciated improvement amount results?
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