In the cost approach, what does 'functional obsolescence' refer to?
Correct Answer
A) Deficiency in design or layout that reduces utility
Functional obsolescence refers to a loss in value due to deficiencies in design, layout, or features that reduce the property's utility or desirability compared to current market standards. This includes outdated floor plans, inadequate storage, or poor traffic flow.
Why This Is the Correct Answer
Option A correctly defines functional obsolescence as deficiencies in design or layout that reduce utility. This aligns with standard appraisal methodology used across Canadian provinces. Functional obsolescence occurs when a property's design, layout, or features are inadequate or outdated compared to current market expectations, reducing the property's overall utility and desirability. Examples include poor room layouts, inadequate electrical systems, or outdated kitchen designs that don't meet modern standards, all of which represent internal design deficiencies rather than external factors or physical wear.
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In the cost approach to valuation, what does the term 'depreciation' refer to?
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A qualifying first-time buyer purchases an $800,000 home in Toronto, so both the provincial Land Transfer Tax and the Toronto Municipal Land Transfer Tax apply. After the maximum first-time buyer rebates, what does the buyer owe?