Cost approach Flashcards
1
Q
In the cost approach, the purchaser will pay no more for a property than the cost of acquiring a ___ property
A
similar
2
Q
The cost approach is also called the ____ - ____ approach to value
A
cost-depreciation
3
Q
What are the steps in the cost approach?
A
- Estimate reproduction cost
- Subtract accrued depreciation
- Estimate the value of the land
- Add the land value to derive value of the property
4
Q
What are the three kinds of depreciation?
A
- Physical deterioration
- Functional obsolescence
- External obsolescence
5
Q
What is physical deterioration?
A
ordinary wear & tear caused by use
6
Q
What is functional obsolescence?
A
- Poor design
- Obsolete equipment
- Examples: poor traffic pattern, too few bathrooms, small closets, not enough storage space
7
Q
What is external obsolescence?
A
caused by neighborhood influences external to the property
