Property Management
The economic life of a building refers to:
AThe time until the building must be demolished
BThe period over which the building contributes positively to property value✓ Correct
CThe physical life of the building's structure
DThe lease term of the major tenant
Explanation
Economic life is the period during which the improvements contribute positively to the total value of the property. After this period, the improvements may have negative value (cost to demolish exceeds any benefit).
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Key Terms to Know
Option Contract
A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
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