A valuer is assessing a 20-year-old industrial building for mortgage security purposes. The building has significant functional obsolescence due to low ceiling heights that don't meet current industry standards. How should this be addressed in the summation approach?
Correct Answer
C) Apply both physical depreciation and functional obsolescence deductions
In the summation approach, both physical depreciation (due to age and wear) and functional obsolescence (due to outdated design features like inadequate ceiling heights) must be deducted from replacement cost. This ensures the valuation reflects the building's reduced utility compared to modern standards.
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A valuer is assessing a 15-year-old commercial building for insurance replacement purposes. Which valuation approach would be most appropriate?
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