Property Valuation
Which type of depreciation is generally considered 'incurable'?
APhysical deterioration from deferred maintenance
BFunctional obsolescence due to an outdated kitchen
CExternal (economic) obsolescence due to a nearby highway✓ Correct
DPhysical deterioration of the roof that can be replaced
Explanation
External (economic) obsolescence is generally incurable because the cause is outside the property — the owner cannot fix a nearby highway, industrial plant, or declining neighborhood. Physical and functional obsolescence may be curable if cost-effective.
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- Economic obsolescence (external obsolescence) is caused by:Property Valuation
- Which of the following would be considered 'curable physical deterioration'?Property Valuation
- Physical depreciation that CANNOT be corrected (because the cost to fix it exceeds the value it adds) is called:Property Valuation
- Functional obsolescence in a property refers to:Property Valuation
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.
Math Concepts
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