Property Valuation
Physical deterioration that can be corrected at a cost that is less than the resulting increase in value is called:
AIncurable physical deterioration
BCurable physical deterioration✓ Correct
CFunctional obsolescence
DExternal obsolescence
Explanation
Curable physical deterioration is deferred maintenance or damage that is economically feasible to repair because the cost of repair is less than (or equal to) the increase in value it produces.
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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.
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