Property Valuation
What is 'economic life' of a building in Delaware appraisal practice?
AThe same as physical life
BThe period during which the building contributes positively to the property's total value✓ Correct
CThe number of years until the building qualifies for historic designation
DThe period during which the property generates positive cash flow
Explanation
Economic life is the period during which the improvements contribute positively to the overall property value. When the building's value contribution becomes zero (improvements no longer add to value), the economic life has ended — even if the structure still stands.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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