Which stated value loss is caused by an external influence?
Correct Answer
A) A verified off-site industrial noise/pollution penalty.
The stipulated loss is caused by verified off-site industrial noise/pollution, so it is external. A plant’s mere presence would not prove a penalty. Internal utility and worn materials are distinct causes, and their curability cannot be inferred from the component name alone.
Why This Is the Correct Answer
Option A is correct because a verified off-site industrial noise or pollution penalty is a loss caused by an influence outside the property. External obsolescence may be caused by environmental factors such as industrial encroachment on a residential neighborhood. The option states the penalty is verified, so the loss is established rather than assumed.
Why the Other Options Are Wrong
Option B: Physical roof wear causing water leakage.
Option B is wrong because physical roof wear causing water leakage is a loss from use and the elements acting on the property. That is physical deterioration, not external obsolescence.
Option C: An undamaged internally inadequate appliance design.
Option C is wrong because an undamaged but internally inadequate appliance design is a problem with the property's own design. That is functional obsolescence, not an external influence.
Option D: A supported internal garage utility deficiency.
Option D is wrong because a supported internal garage utility deficiency arises within the property's design. It is functional obsolescence rather than a loss caused by outside conditions.
Outside the lot, external
If the cause of the loss lies beyond the property lines, it is external obsolescence. Causes inside the property are physical or functional.
How to use: Use this lot-line check to separate external obsolescence from physical and functional losses.
Exam Tip
Look for words such as off-site, neighborhood or market conditions; these indicate an external cause.
Common Mistakes to Avoid
- -Treating an internal design flaw as external obsolescence
- -Assuming a nearby industrial use causes a loss without market evidence
- -Classifying weather-related roof wear as external obsolescence
Concept Deep Dive
Analysis
This question tests identifying external obsolescence by where the cause originates. A loss caused by something outside the property, such as nearby industrial noise or pollution, is external. Losses from roof wear or from internal design shortcomings arise within the property itself.
Background Knowledge
External obsolescence is a loss in value caused by negative influences outside the property, such as environmental nuisances or shifts in local economic conditions. Because real property is immobile, the owner typically cannot cure it. A nearby use must be shown through market evidence to cause a penalty; its mere presence does not prove one.
Real-World Application
An appraiser values a home located next to a newly expanded industrial facility. Paired sales show homes near the plant sell at a discount due to noise, so the appraiser deducts a supported external obsolescence amount.
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?
The principle of anticipation in real estate valuation states that:
Which highest-and-best-use criterion addresses whether a proposed use is allowed by zoning and applicable legal restrictions?
Three comparables produce adjusted indications of $312,000, $309,000 and $315,000, requiring gross adjustments of 9%, 14% and 22% respectively. Verification also establishes that the first sale is the closest competitive substitute and its adjustments are better supported than the other two. Which indication deserves the most weight on those facts?
When reconciling value indications from the three approaches to value, an appraiser should:
A property sold at a cash-equivalent price of $1,062,500. Its stabilized annual NOI is $85,000. What is the indicated overall rate?
In reconciliation, an appraiser should:
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
Related Tools
Previous Question
Which loss is physical deterioration?
Next Question
A comparable’s cash-equivalent price is $265,000. Use a supported simple +0.25% per month adjustment on the original price for a verified eight-month contract-to-effective-date interval. Apply separate market-supported feature adjustments of −$9,000 and +$4,500 at the effective date. What adjusted price results?