Property Valuation
Curable depreciation in the cost approach refers to items where:
AThe cost to cure exceeds the value added
BThe cost to cure is less than or equal to the value added by the cure✓ Correct
CThe depreciation is caused by external factors
DThe item has been fully depreciated on paper
Explanation
Curable depreciation (physical or functional) refers to items where the cost to repair or update is justified by the resulting increase in value. For example, replacing worn carpet (cost: $5,000; value added: $6,000) is economically curable depreciation.
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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.
Math Concepts
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