California Real Estate Broker ExaminationValuation and AppraisalMedium
An appraiser is analyzing a property built 30 years ago. Despite its age, the property has undergone extensive renovations, including a new roof, updated plumbing and electrical systems, and modern interior finishes. The appraiser determines that the property functions and appears as if it were only 10 years old. This 10-year figure represents the property's:
- AEffective Age
- BChronological Age
- CRemaining Economic Life
- DEconomic Life
Show answer & explanationAnswer & explanation
Correct answer: A. Effective Age
Effective age is an appraiser's estimate of the age of a building based on its condition and utility, rather than its actual chronological age. Extensive renovations can reduce a property's effective age.
Why the other options are wrong
- B. Chronological age is the actual age of the property (30 years).
- C. Remaining economic life is the future period a property is expected to contribute value.
- D. Economic life is the period over which an improvement contributes to value.
Effective Age
Effective age is an appraiser's estimate of the age of a building based on its physical condition, functional utility, and market desirability, which may be different from its chronological age.
- Can be less than chronological age due to renovations.
- Used in the cost approach to estimate depreciation.
- Reflects the property's perceived age in the market.
Memory trick: Chronological is calendar, Effective is condition, Economic is useful life.