Property Valuation
What is 'economic life' versus 'physical life' of a building in appraisal?
AThey are the same concept; both describe how long a building will last
BPhysical life is how long the structure can exist with maintenance; economic life is the period during which the improvement contributes to property value✓ Correct
CEconomic life applies to commercial buildings; physical life to residential
DPhysical life is longer than economic life only in industrial properties
Explanation
Physical life is the total period a building can exist with normal maintenance before it must be demolished. Economic life (or useful life) is the period during which the improvement contributes positively to the property's value. Economic life is usually shorter than physical life—a building may still be standing but no longer add value if it's functionally or economically obsolete.
Related Illinois Property Valuation Questions
- In real estate, a 'floor area ratio' (FAR) is used in zoning to express:
- Economic (external) obsolescence is best described as a loss in value due to:
- In the sales comparison approach, an appraiser makes adjustments to comparable sales to account for differences between the comparable and the subject property. If a comparable has a feature the subject lacks, the appraiser should:
- Which of the following properties would typically NOT use the income capitalization approach as the primary appraisal method?
- In the cost approach to value, the formula for determining value is:
- The principle of anticipation in real estate valuation holds that value is created by:
- If a comparable property sold for $310,000 and had an extra full bathroom that the subject property lacks, the appraiser would make what kind of adjustment?
- Which type of depreciation is considered incurable by the property owner?
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