Property Valuation
In New Mexico, which of the following would be an example of functional obsolescence that is 'curable'?
AA property located next to a noisy highway
BOutdated kitchen appliances that can be cost-effectively replaced✓ Correct
CA poor floor plan that would require removing structural walls to fix
DLocation in a declining commercial district
Explanation
Curable functional obsolescence can be remedied at a cost that is less than or equal to the value it adds. Replacing outdated appliances is economically feasible—the cost of replacement is typically less than the value gained.
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Key Terms to Know
Net Operating Income (NOI)
The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
DepreciationA 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.
Math Concepts
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