Which characteristic distinguishes external obsolescence from the other forms of depreciation?
Correct Answer
C) Its cause lies outside the property's boundaries
Why this is correct: External obsolescence (economic or locational) is caused by factors outside the property's boundaries (e.g., neighborhood decline, loss of major employer). This distinguishes it from physical deterioration (within the building) and functional obsolescence (within the property's design). Why the other choices are wrong: It often cannot be cured by the owner. It applies to all property types, not just commercial. It can affect both land and improvements; it must be allocated. Exam tip: Remember the 'E' in External: cause is External to the property.
Why This Is the Correct Answer
Why this is correct: External obsolescence (economic or locational) is caused by factors outside the property's boundaries (e.g., neighborhood decline, loss of major employer). This distinguishes it from physical deterioration (within the building) and functional obsolescence (within the property's design). Why the other choices are wrong: It often cannot be cured by the owner. It applies to all property types, not just commercial. It can affect both land and improvements; it must be allocated. Exam tip: Remember the 'E' in External: cause is External to the property.
More Cost Approach Questions
In a cost approach for a proposed building, the appropriate cost basis is generally:
A warehouse cost $210,000 to build when the cost index stood at 105. The index is now 210. Its indicated current cost is:
The age-life method expresses depreciation as:
Market extraction of depreciation is limited by the fact that it:
Functional obsolescence caused by a deficiency is measured as curable when:
Curable physical deterioration is measured at cost to cure because:
A 2,050 sq ft dwelling is priced at $178 per square foot with a $34,000 detached garage and $21,500 of site improvements. Cost new is:
A house has three bedrooms sharing one bathroom, and adding a second bath is economically justified. This is:
Direct costs in a construction budget include:
An appraiser writes that a 40-year-old house has an effective age of 10 but describes original wiring, original kitchen and a 25-year-old roof. The report's problem is:
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