Property ValuationIntermediateAlaska Exam

Which of the following BEST describes 'effective age' in appraisal?

AThe number of years since the structure was built
BThe age indicated by the condition and utility of the structure, which may differ from chronological ageCorrect
CThe number of years remaining on the depreciation schedule, which most practitioners would generally accept
DThe age of the original foundation

Why The age indicated by the condition and utility of the structure, which may differ from chronological age Is Correct

Answer B: The age indicated by the condition and utility of the structure, which may differ from chronological age

Effective age reflects the condition and utility of a building — a well-maintained 40-year-old structure may have an effective age of 20 years, while a poorly maintained 10-year-old structure may have an effective age of 25 years. Effective age differs from chronological (actual) age.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

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