In the cost approach to valuation in California, all of the following are examples of external (economic) obsolescence EXCEPT:
Correct Answer
B) A home's value decreases because the property has an outdated electrical system that does not meet current California Title 24 energy standards
An outdated electrical system that does not meet California Title 24 energy standards is an example of functional obsolescence (a deficiency within the property itself), NOT external obsolescence. External obsolescence is caused by factors outside the property boundaries that are beyond the owner's control.
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Previous Question
A California appraiser is valuing a 20-year-old commercial building in downtown Sacramento using the cost approach. The replacement cost new is $1,800,000. The appraiser identifies: physical deterioration of $360,000, functional obsolescence (curable) of $90,000 for an outdated HVAC system, and external obsolescence of $150,000 due to a nearby California high-speed rail construction zone that creates noise. The land value is $950,000. What is the indicated value using the cost approach?
Next Question
An appraiser in Orange County, California is calculating physical deterioration using the age-life method. The home has an actual age of 25 years but an effective age of 15 years due to extensive renovations. The total economic life is estimated at 75 years. The replacement cost new of the improvements is $720,000. What is the accrued physical depreciation?