A Colorado property with above-market fixtures (granite countertops in an entry-level neighborhood) suffers from:
Why Functional obsolescence — over-improvement (super-adequacy) Is Correct
Answer B: Functional obsolescence — over-improvement (super-adequacy)
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 reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Listing AgreementA contract between a property owner and a real estate broker that authorizes the broker to market and sell the property.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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