Real Estate Math
An appraiser uses the cost approach on a 15-year-old building with a 45-year economic life. The reproduction cost new is $450,000. What is the depreciated value of the improvements?
A$300,000✓ Correct
B$330,000
C$305,000
D$315,000
Explanation
Depreciation rate = Age ÷ Economic Life = 15 ÷ 45 = 33.33%.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Math Concepts
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