In a 2026 appraisal assignment, a home in a modest subdivision has an elaborate indoor basketball court that cost far more to build than buyers in that market are willing to pay for it. In the cost approach, this is most likely treated as what?
Correct Answer
B) Functional obsolescence due to a superadequacy
When an improvement costs more than the market recognizes as contributory value, the issue is often a superadequacy. That is a form of functional obsolescence, because the property has more or different utility than buyers in that market are willing to pay for.
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- → An example of functional obsolescence is:
- → The best method to determine fair market value is:
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During an August 2026 buyer consultation, Rafael asks how land is handled when an appraiser uses the cost approach for a residential property. How is site value generally treated?
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On a September 2026 appraisal, Appraiser Chloe estimates replacement cost new of a dwelling at $270,000 and of a detached garage at $12,000. The site value is $70,000, and total accrued depreciation is $40,000. What indicated value does the cost approach produce?