Real Estate Math
An Alaska property appraiser finds the cost to replace improvements is $620,000. Physical depreciation is 15%, functional obsolescence is 5%, and external obsolescence is 3%. Total depreciation is:
A$71,300
B$100,120
C$143,960✓ Correct
D$120,900
Explanation
Total depreciation percentage = 15% + 5% + 3% = 23%. Total depreciation = $620,000 × 23% = $142,600.
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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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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