California Real Estate SalespersonProperty Valuation and Financial AnalysisEasy
A 30-year-old single-family home has been exceptionally well-maintained, with recent major renovations to the kitchen, bathrooms, and roof. An appraiser estimates that, due to these improvements, the property's condition and appeal are comparable to a 10-year-old home. What is the 10-year figure representing in the appraisal?
- AChronological age
- BEconomic life
- CRemaining economic life
- DEffective age
Show answer & explanationAnswer & explanation
Correct answer: D. Effective age
Effective age is the age of a property based on its condition and utility, rather than its actual chronological age. Due to excellent maintenance and renovations, a 30-year-old home can have a much lower effective age.
Why the other options are wrong
- A. Chronological age is the actual age of the property (30 years).
- B. Economic life is the total period over which a property is expected to be useful, not a current age.
- C. Remaining economic life is the future period of usefulness, not the current perceived age.
Effective Age
The age of a property indicated by its condition and utility, which may be different from its chronological age due to maintenance or lack thereof.
- Used in the cost approach to calculate depreciation
- Can be less than chronological age with good maintenance
- Can be greater than chronological age with poor maintenance
Memory trick: Effective Age Reflects Condition, Not Just Calendar