Property Valuation
What is 'effective age' of a building in appraisal terms?
AThe calendar age of the building from its construction date
BThe age the building appears to be based on its condition and utility✓ Correct
CThe remaining useful life of the building
DThe age at which depreciation stops accruing
Explanation
Effective age reflects the building's apparent age based on its current condition and level of maintenance — it may be more or less than the chronological age. A well-maintained older building may have a lower effective age than a poorly maintained newer one.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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