A California appraiser is estimating the cost to cure functional obsolescence in a home in San Jose. The home has a 1-car garage in a market where 2-car garages are standard. The cost to convert to a 2-car garage is $45,000, and the market value added by the conversion is $55,000. Is this functional obsolescence curable, and what is the depreciation amount to apply?
Correct Answer
C) Curable; depreciation is $45,000 (the cost to cure)
This is curable functional obsolescence because the cost to cure ($45,000) is less than the value added ($55,000), making the cure economically feasible. Under appraisal practice, when functional obsolescence is curable, the depreciation amount applied in the cost approach equals the cost to cure ($45,000), not the value added.
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Previous Question
A California appraiser is using the cost approach to value a 50-year-old home near a recently completed California Department of Transportation (Caltrans) freeway widening project. The increased traffic noise has reduced property values in the neighborhood by an estimated 8%. This loss in value is classified as what type of depreciation, and can the property owner cure it?
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In using the cost approach in California, an appraiser must estimate the land value separately from the improvements. Which method is MOST commonly used to estimate land value for a residential property in California?