Property ValuationIntermediateCalifornia Exam

What is 'physical deterioration' in property appraisal?

ALoss in value from changes in neighborhood demographics, per standard California valuation practice
BLoss in value from wear, tear, and age of physical components of the propertyCorrect
CLoss in value from outdated design or features, under standard appraisal methodology
DLoss in value from oversupply in the market, as typically applied in a comparative market analysis

Why Loss in value from wear, tear, and age of physical components of the property Is Correct

Answer B: Loss in value from wear, tear, and age of physical components of the property

Physical deterioration is loss in value due to the physical wearing out of improvements (roof, HVAC, paint, structure). It can be 'curable' (cost-effective to fix) or 'incurable' (not cost-effective or impossible to fix).

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.

Depreciation

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

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