Property Valuation
A NH appraiser finds that a subject property has a cracked foundation that would cost $30,000 to repair. In the cost approach, this would be treated as:
AExternal obsolescence attributable to neighborhood factors
BFunctional obsolescence due to outdated design
CPhysical deterioration (curable if repair costs are justified by increased value)✓ Correct
DLand value adjustment
Explanation
A cracked foundation is a form of physical deterioration (structural damage). It is curable if the cost to repair ($30,000) results in an equal or greater increase in value.
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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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