Property Valuation
Which type of depreciation is caused by factors OUTSIDE the property, such as a nearby highway being constructed?
APhysical deterioration
BFunctional obsolescence
CEconomic (external) obsolescence✓ Correct
DCurable depreciation
Explanation
Economic or external obsolescence is caused by factors outside the property itself — such as nearby industrial development, highway construction, or neighborhood decline. It is typically incurable because the property owner cannot control the external cause.
Related Arkansas Property Valuation Questions
- In the income approach to value, Net Operating Income (NOI) is calculated as:
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- A property generates a net operating income of $30,000 per year. Using a capitalization rate of 6%, what is the indicated value?
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