Cost-Depreciation Problem

Below is a table containing data from a field inspection of a subject property that compares the property with that of a "base" property.   Also included in the table for each item of the field inspection is the cost service guide value per unit of difference.

The price per square foot of the base home is $29.40.  The subject property is a one story ranch that has 2,200 square feet of living area.  It also has a 600 sq. foot built-in attached garage.  The lot is estimated to be worth $44,000. 

Base Property

Subject Property

Unit Price

Roofing

Asphalt Shingle

Clay Tile

3.69

Subfloor

Wood

Concrete Slab

-2.65

Floor Cover 1

0

1800 carpet

3.45

Floor Cover 2

0

450 tile

3.74

Heating/Cooling

Forced air

Hot water

1.27

Energy Adjustment

Moderate

Extreme

1.26

Foundation

Moderate

Extreme

2.43

Plumbing

11

14

1150

Fireplaces

0

1

2750

Built-in Appliances

0

all

4025

Basement

0

Unfinished

11

Porch/Breezeway

0

150 sf Screen

30

Garage

0

600

14.75

Driveway

0

1000

2.4

Depreciation Computation

Physical Deterioration--Short-Lived Items (Worksheet)

Item Effective Age Useful Life Cost New Depreciation
Appliances 9 years 12 years 4025  
HVAC 9 20 $7500  
Driveway 12 20 2400  

Physical Deterioration--Long-Lived Items (Worksheet)

Upon inspection, the subject property's effective age was estimated to be 9 years.   It's Useful life is estimated to be 50 years.

1.  Reproduction Cost New (from form below [line 30])  
2.      Less Total Cost New of Short-lived Items Above  
3.  Total Long-lived Cost New (Line 1 - Line 2)  
Effective Age (EA)   Useful Life (UL)   Depreciation (EA/UL*Line3)  

Total Physical Deterioration (Worksheet)

Short-lived Physical Deterioration  
Long-lived Physical Deterioration  
Total Physical Deterioration  

Functional Obsolescence

    None noted during the inspection.

Economic Obsolescence

    None noted during the inspection.

Use the form below to estimate the reproduction cost of the subject property as well as the final value estimate using the cost-depreciation approach.  The current cost multiplier is 1.03 and the local multiplier is 1.09.

 

Square Foot Appraisal Form

    Quantity

    Cost

    Amount

    1. Compute Basic Residence Cost

    2. Square Foot Adjustments

    3.     Roofing

    4.     Subfloor

    5.     Floor Cover

    6.     Interior Finish

    7.     Heating/Cooling

    8.     Energy Adjustment

    9.     Foundation

    10. Lump Sum Adjustments

    11.     Plumbing

    12.     Fireplaces

    13.     Built-in Appliances

    14.     Miscellaneous

    15. Subtotal Adjusted Residence Cost (Line 1 +/- lines 3-14)

    16. Basement, Unfinished

    17.     Add for basement interior finish

    18.     Add for basement outside entrance

    19.     Add for basement garage

    20. Pourch/Breezeway

    21.

    22. Subtotal Residence Cost (Total of lines 15-21.)

    23. Garage or Carport

    24.     Miscellaneous Roofing Adjustment

    25.     Subtotal of Garage Cost:

    26. Yard Improvements

    27. Driveway

    28. Subtotal of All Building Improvements

    29. Current Cost Multiplier

    x Local multiplier

    =

    30. Replacement Cost New (Line 28 X Line 29)

    31. Depreciation From Above Worksheets

    32.      Physical

    33.      Functional

    34.      Economic

    35. Total Depreciation

    36. Depreciated Cost (Line 30 - Line 35)

    37. Landscaping

    38.

    39.

    40. Lot or Land Value

    41. Total Indicated Value Cost-Depreciation (The Sum of Lines 36-40)

     Cost-Depreciation questions:

    Question 1   Multiple Choice (1.0000 points)
      Question: What is the basic residence cost of the living area?
     
        $47,040
    $64,680
    $82,320
    $95,998
     

     
    Question 2   Multiple Choice (1.0000 points)
      Question: What is the proper adjustment for the subfloor? (line 4)
     
        -$4,240
    $5,830
    -$5,830
    -$7,420
     

     
    Question 3   Multiple Choice (1.0000 points)
      Question: What is the proper adjustment for carpeting?
     
        $6,210
    $6,732
    $7,590
    $8,228
     

     
    Question 4   Multiple Choice (1.0000 points)
      Question: What is the proper adjustment for short-lived physical depreciation?
     
        $6,091
    $7,834
    $13,925
    $26,033
     

     
    Question 5   Multiple Choice (1.0000 points)
      Question: What is your estimate of the long-lived physical deterioration?
     
        $24,967
    $27,473
    $113,737
    $125,156
     

     
    Question 6   Multiple Choice (5.0000 points)
      Question: What is your final estimate of the value of the entire property using the cost-depreciation approach? (line 41)
     
        $103,148
    $119,828
    $147,148
    $163,828