What is 'depreciation' in the cost approach to appraisal?
Why Any loss in value from any cause, including physical deterioration, functional obsolescence, and economic (external) obsolescence Is Correct
Answer B: Any loss in value from any cause, including physical deterioration, functional obsolescence, and economic (external) obsolescence
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
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Key Terms to Know
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
Math Concepts
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