Property Valuation
A West Virginia appraiser inspects a property and notes the water heater is 20 years old and near the end of its useful life. This is an example of:
AExternal obsolescence
BFunctional obsolescence
CDeferred maintenance / physical deterioration✓ Correct
DHighest and best use issue
Explanation
A water heater near the end of its useful life represents physical deterioration (a form of physical depreciation). Deferred maintenance describes physical items that need attention, while a worn-out component nearing replacement is a form of physical deterioration.
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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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