An appraiser is estimating accrued depreciation for a 15-year-old well-maintained residence located near a major transit facility that generates substantial ongoing noise. Which depreciation method is most appropriate, and why?
Correct Answer
B) The observed condition (breakdown) method, because it allows each category of depreciation to be identified and quantified independently
The observed condition (breakdown) method separately identifies and measures each category of depreciation: physical deterioration, functional obsolescence, and external obsolescence. This granularity is essential when depreciation sources are uneven — here, physical deterioration is likely minimal due to good maintenance, while external obsolescence from transit noise may be substantial. The age-life method applies a single effective-age-to-total-economic-life ratio that blends all depreciation into one figure, obscuring the disproportionate impact of external obsolescence and producing a less accurate result.
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Previous Question
An appraiser in California is estimating external obsolescence for a residential property adjacent to a state-designated Superfund cleanup site in the San Fernando Valley. The contamination is on the neighboring property, not the subject. The appraiser determines through paired sales that properties near the site sell for 12% less than similar properties further away. In the cost approach, how should this external obsolescence be allocated?
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When using a national cost manual to estimate replacement cost for a California property, which of the following adjustments is most critical for the appraiser to apply?