Question

All of the following would have an effect on the final estimate of value when making an appraisal of an old family residence except: 

Selections

• A. Purpose of the appraisal

• B. Suitability of the residence to the site

• C. Physical condition of the building

• D. Original cost of the residence 

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Answer: D

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5 Keys Summary

• The factor that would not affect the final estimate of value is the Original cost of the residence.

• The original cost of construction is considered a historical cost and generally has little or no influence on the current market value of a used home.

• The appraisal process follows the Principle of Change, focusing on the future and current market conditions rather than past costs.

• The Purpose of the appraisal is crucial because it defines the type of value being sought (e.g., market value or insurance value), directly influencing the chosen valuation methodology.

• The Physical condition and Suitability (location, functional plan, obsolescence) are critical factors because they directly impact the current desirability, depreciation, and overall usefulness of the property.

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