Property ValuationIntermediateNorth Carolina Exam

External (economic) obsolescence in real estate is characterized as:

ACurable because the owner can fix it

BIncurable because it originates outside the propertyCorrect

COnly affecting commercial properties

DCovered by the homeowner's insurance policy, in general

Why Incurable because it originates outside the property Is Correct

Answer B: Incurable because it originates outside the property

External obsolescence originates from forces outside the property (nearby highway, industrial rezoning, declining neighborhood) and is generally incurable by the property owner.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Zoning

Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.

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Key Terms to Know

Zoning

Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

Appraisal

A 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.

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