Property ValuationIntermediateNorth Carolina Exam

Functional obsolescence in a NC property is caused by:

AExternal economic forces like a new highway, which is broadly consistent with standard practice statewide

BDeficiencies or superadequacies within the property itself that reduce its utility or desirabilityCorrect

CPhysical deterioration from weather damage

DMarket-wide price declines

Why Deficiencies or superadequacies within the property itself that reduce its utility or desirability Is Correct

Answer B: Deficiencies or superadequacies within the property itself that reduce its utility or desirability

Functional obsolescence results from factors within the property itself: outdated floor plans, inadequate square footage, lack of features buyers expect (deficiencies), or over-improvements (superadequacies).

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.

People Also Study

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.

Option Contract

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.

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.

Math Concepts

Area Calculation

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Property Valuation Guide

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