General - Chapter 10 Lesson 3 Flashcards
(22 cards)
Estimate of value =
building-depreciation+land value
Depreciation is a…
monetary loss of value to improvements for any reason
Land can decline in value, but never…
depreciates
Curable
repair costs less than the estimated gain in value
incurable
repair costs more than the estimated gain in value
if repair must be made…
it is curable
Physical Deterioration
refers to actual wear and tear due to age, element, unprepared damage, or other forces (observable)
Functional Obsolescence
describes a building that is less desirable because of something inherent in the structure (outdated home style, out-dated fixtures, unusual floor flans)
External Obsolescence
outside property owner’s control makes the property less desirable (economic or locational) - always incurable
Accrued depreciation
Total dollar amount of loss due to depreciation for any reason
Methods to estimate depreciation
age-life method, breakdown method, market abstraction method
age-life method
compares a structure’s effective age to its useful age, or economic life
what affects effective age
house neglected, abused, or damaged, poor floor plan, location, environmental issues, changes in property use
Age life ratio =
effective age/economic life
Replacement cost
cost of constructing a building that is an exact replica of the original building using the same construction techniques and materials
Reproduction cost
the cost of constructing exact replica
Breakdown method
allows a more in-depth and comprehensive analysis of depreciation and its cause
Market abstraction method
more analytical and less subjective method of determining depreciation than the age-life or breakdown methods, analyzes current sales to see how the market has already responded to depreciation
land value/ site value includes…
enhancements necessary to make it ready for building (water, sewer, and electricity) other site improvements must also be considered (driveways, landscaping, walkways, and utility provisions)
Site value most often determined using the
sales comparison approach
if improvements are not consistent with props highest and best use, it would be…
addressed as obsolescence and result in depreciation of improvments
