Property ValuationIntermediateColorado Exam

The 'effective age' of a building in Colorado appraisal refers to:

AThe actual chronological age of the building
BThe age indicated by the building's condition and utility, which may differ from its actual ageCorrect
CThe age at which the building must be demolished
DThe age at which depreciation begins for tax purposes, which is the approach most often followed

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

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

Effective age reflects the building's condition, functionality, and utility rather than its actual chronological age. A well-maintained building may have an effective age younger than its actual age, while a poorly maintained building may have an older 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.

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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