A Colorado appraiser who determines a property has 'functional obsolescence' due to an outdated kitchen layout should:
Why B. Apply a downward adjustment in the cost approach to reflect the loss in value caused by the functional deficiency Is Correct
Answer B: B. Apply a downward adjustment in the cost approach to reflect the loss in value caused by the functional deficiency
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.
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Key Terms to Know
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
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