Property Valuation
External obsolescence affecting a Maine coastal property due to a nearby highway construction is best classified as:
ACurable physical deterioration
BIncurable physical deterioration
CFunctional obsolescence
DEconomic obsolescence✓ Correct
Explanation
Economic (external) obsolescence is caused by factors outside the property, such as nearby highway construction. It is generally incurable since the property owner cannot correct external conditions.
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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.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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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