Real Estate Appraisal Practice Exam

What are the four measures an appraiser uses to estimate depreciation for a structure?

1. Economic life, physical life, effective age, and remaining economic life

2. Deterioration, obsolescence, effective age, and economic life

3. Functional life, physical life, effective age, and current market value

4. Total life, remaining life, economic life, and improvement costs

The correct answer is: Economic life, physical life, effective age, and remaining economic life

The four measures an appraiser uses to estimate depreciation for a structure include economic life, physical life, effective age, and remaining economic life. Economic life refers to the period during which a property can be expected to generate income or maintain its value adequately. Physical life denotes the total lifespan of the physical structure, reflecting wear and tear over time. Effective age is an appraisal concept that reflects the condition and utility of a building, considering its maintenance and updates, resulting in an estimation that may differ from its chronological age. Remaining economic life is the forecast of how long the property is still expected to provide economic benefits before reaching the end of its useful life. These concepts collectively help an appraiser understand how different factors impact a property's value over time, especially in estimating depreciation. Other options do not combine these primary measures effectively, leading to less accurate assessments of depreciation. For instance, while obsolescence is a critical concept, it's typically considered a type of depreciation rather than a direct measure used for estimating it.