Property ValuationIntermediateCalifornia Exam

The 'effective age' of a building used in appraisal is best defined as:

AAlways equal to the actual chronological age of the structure, as typically applied in a comparative market analysis
BThe age indicated by the building's condition and utility, which may differ from its chronological ageCorrect
CThe number of years remaining in the building's economic life, consistent with USPAP appraisal standards
DDetermined solely by the year the original building permit was issued, per standard California valuation practice

Why The age indicated by the building's condition and utility, which may differ from its chronological age Is Correct

Answer B: The age indicated by the building's condition and utility, which may differ from its chronological age

Effective age reflects a building's actual condition and functional utility. A well-maintained older home may have a lower effective age than its chronological age, while a poorly maintained newer building may have a higher effective 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.

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