Agency
What is the 'economic life' of a building and why does it matter in real estate?
AThe number of years a building's mortgage will be outstanding
BThe estimated period over which the building will contribute positively to the property's value, used in depreciation calculations and investment analysis✓ Correct
CThe number of years before a building must be demolished under Delaware building codes
DThe period a building is economically active before being converted to a different use
Explanation
Economic life (useful life) is the estimated period over which improvements contribute positively to the property's value. It is used in the cost approach (straight-line depreciation formula: Annual Depreciation Rate = 1 ÷ Economic Life) and in investment analysis. Economic life may be shorter than physical life if the building becomes functionally obsolete.
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