Florida Real Estate Sales Associate Examination Content OutlineReal Estate Valuation and Market AnalysisMedium
A 20-year-old single-family home has an estimated effective age of 10 years due to extensive renovations and upgrades. If the economic life for this type of home is typically 50 years, what is the remaining economic life?
- A20 years
- B30 years
- C40 years
- D50 years
Show answer & explanationAnswer & explanation
Correct answer: C. 40 years
The remaining economic life is calculated by subtracting the effective age from the total economic life. In this case, 50 years (economic life) - 10 years (effective age) = 40 years. The actual age of 20 years is irrelevant for this calculation.
Why the other options are wrong
- A. This would be the remaining life if effective age was 30 years.
- B. This would be the remaining life if effective age was 20 years (actual age).
- D. This is the total economic life, not the remaining life.
Remaining Economic Life
The period of time over which an improvement is expected to continue to contribute to the value of the property.
- Calculated as Total Economic Life minus Effective Age.
- Effective Age can be different from actual age due to maintenance or neglect.
- It's a key factor in depreciation calculations in the cost approach.
Memory trick: Life's a game, and effective age resets the clock on your property's value!