Property ValuationIntermediateAlaska Exam

External obsolescence in property appraisal is caused by:

ADeferred maintenance on the structure, which most practitioners would generally accept

BFactors outside the property itself, such as economic decline or a nearby nuisanceCorrect

CAn outdated floor plan

DWorn-out mechanical systems

Why Factors outside the property itself, such as economic decline or a nearby nuisance Is Correct

Answer B: Factors outside the property itself, such as economic decline or a nearby nuisance

External (economic) obsolescence results from factors outside the property's boundaries — such as neighborhood decline, nearby industrial uses, highway noise, or broader economic conditions. It is typically incurable.

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.

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Key Terms to Know

Appraisal

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

Net Operating Income (NOI)

The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.

Depreciation

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

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

Math Concepts

Net Operating Income

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