California Real Estate Broker ExaminationValuation and AppraisalHard
A potential buyer is evaluating a 20-year-old apartment building. They are told that the property is expected to continue generating income and be economically viable for another 30 years. This 30-year period represents the property's:
- AChronological Age
- BRemaining Economic Life
- CEffective Age
- DEconomic Life
Show answer & explanationAnswer & explanation
Correct answer: B. Remaining Economic Life
Remaining economic life is the estimated period during which an existing improvement is expected to continue to contribute to property value. The full economic life would be 20 (past) + 30 (future) = 50 years.
Why the other options are wrong
- A. Chronological age is the actual age of the property (20 years).
- C. Effective age is the age based on condition, not future viability.
- D. Economic life is the total period of economic usefulness (20 + 30 = 50 years), not just the remaining period.
Remaining Economic Life
Remaining economic life is the estimated period from the date of the appraisal during which a property's improvements are expected to continue to contribute value to the land.
- Refers to the future period of usefulness.
- Used in the cost approach to estimate depreciation.
- Distinct from total economic life and chronological age.
Memory trick: Economic life is total; remaining is future; chronological is past.