An appraiser judges the effective age of a house to be 15 years. If its total economic life is 60 years, what is its remaining economic life?
Correct Answer
B) 45 years
60−15 = 45 years remaining. Common errors: adding effective age to total life instead of subtracting gives 75 years; reading the 15/60 age-life ratio (25%) as years gives 25 years; reporting the total economic life gives 60 years.
Why This Is the Correct Answer
Option B is correct because remaining life equals total economic life minus effective age. Here that is 60 - 15 = 45 years.
Why the Other Options Are Wrong
Option A: 25 years
Option A, 25 years, is wrong because it reads the age-life ratio, 15 / 60 = 25%, as a number of years. That ratio measures depreciation, not life; remaining life is 60 - 15 = 45 years.
Option C: 60 years
Option C, 60 years, is wrong because it reports the total economic life rather than what remains. Subtracting the 15-year effective age gives 45 years.
Option D: 75 years
Option D, 75 years, is wrong because it adds effective age to total life (60 + 15) instead of subtracting it. The correct remaining life is 60 - 15 = 45 years.
Used plus left equals whole
Effective age is life used, remaining life is life left, and the two add up to total economic life.
How to use: Use this to find any one of the three life figures from the other two.
Exam Tip
Before calculating, note which of the three life figures is unknown. Distractors repeat a given figure, add when you should subtract, or turn a ratio into years.
Common Mistakes to Avoid
- -Adding effective age to total life
- -Reading the age-life ratio as a number of years
- -Reporting total economic life as remaining life
Concept Deep Dive
Analysis
This question tests the age-life identity: total economic life equals effective age plus remaining life. Solving for remaining life gives total life minus effective age. With 60 years total and 15 years effective age, remaining life is 45 years.
Background Knowledge
Effective age reflects an improvement's condition and utility compared with typical properties, and remaining economic life is the period over which it is expected to keep contributing to value. Together they equal total economic life, which is the basis of the age-life method.
Real-World Application
An appraiser judges a well-kept house to have an effective age of 15 years and a typical 60-year economic life. The appraiser reports about 45 years of remaining economic life to support the age-life depreciation estimate.
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
Total improvement cost new is $420,000, including separately treated short-lived cost $58,000 with supported loss $24,000. Apply an 18% physical-loss ratio only to the remaining long-lived cost. No other loss applies. What TOTAL physical depreciation results?
Next Question
In a construction budget, which of these groups is a direct construction cost?