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Question on Depreciation

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Beth DeVilbiss

Thread Starter
Freshman Member
Joined
Nov 13, 2007
Professional Status
Licensed Appraiser
State
Virginia
Why would a 3 bedroom with one bath be considered incurable?
 

Don Clark

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
Why would a 3 bedroom with one bath be considered incurable?

Who said it is? I would suggest that whether or not a 3 bedroom anything with one bath is not sufficient would depend on the market, property type, what is typical for the market, etc. The word incurable is used to denote that curing is:

1. Not physically possible
2. Not legally permissable
3. Not economically feasible.
 

Mike Boyd

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Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
only a 0 bath with no plumbing, no water, no room for an outhouse would be incurable. It might be functionally inadequate, but it might not be, depending on the market.

Otherwise, cost to cure X 2 would likely be my estimate of functional depreciation, IF.....the market is limited to 2 or more baths.
 

Beth DeVilbiss

Thread Starter
Freshman Member
Joined
Nov 13, 2007
Professional Status
Licensed Appraiser
State
Virginia
I have been studying to upgrade my license and one of the test questions in my fundamentals book stated that a 3 bedroom house with one bath is "functional incurable" as the correct answer to what type of depreciation it has. It really confused me because if adding a 2nd bath or even half bath would contribute to its value then this doesn't make sense.
 

Don Clark

Elite Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Virginia
I have been studying to upgrade my license and one of the test questions in my fundamentals book stated that a 3 bedroom house with one bath is "functional incurable" as the correct answer to what type of depreciation it has. It really confused me because if adding a 2nd bath or even half bath would contribute to its value then this doesn't make sense.


Beth,

Who is the books publisher? I would like to know. I suspect I do know. Sned me an e-mail

[email protected]

Without the proper context there is no way the answer could be right.
 

Scott Kibler

Elite Member
Joined
Oct 7, 2003
Professional Status
Certified Residential Appraiser
State
Illinois
Sounds like the cost of building the additional bathroom would be greater than the resulting contribution to value.
 

KD247

Senior Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
Funny example. Would this statement be accurate?

"Local buyers expect three bedroom homes to have at least two bathrooms, and demand a discount for homes with only one bathroom. This discount is greater than the cost for an original-construction bathroom, but is less than the cost of a retrofitted bathroom."

"The difference between that discount and the cost of an original-construction bathroom is attributed to Functional Obsolescence. The difference between the discount and the cost of a retrofitted bathroom makes the Functional Obsolescence incurable."

Now, I'll make up some numbers:

Value of a 3BR/2ba house $300k
Value of a 3BR/1ba house $290k
Value of the 2nd Bathroom $5k
Functional Obsolescence $5k
Cost of Original Construction Bathroom $5k
Cost of Retrofit Bathroom $15k

I guess this is a conceivable situation, provided that the market considers those small increments to be significant amounts. I'm sure most appraisers would simply make a $10,000 bathroom adjustment and not make the effort to thoroughly explain a 1.6% discrepancy in the Cost Approach.

In fact, if I saw a report where the appraiser had gone to that much trouble explaining such a small difference, I'd probably assume that it was a red herring, trying to distract the reader from some greater problem with the appraisal.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Welcome to the real world of testing where if you think too deeply you realize the question creator did not.
 

moh malekpour

Elite Member
Joined
May 25, 2002
Professional Status
Certified Residential Appraiser
State
California
I have been studying to upgrade my license and one of the test questions in my fundamentals book stated that a 3 bedroom house with one bath is "functional incurable" as the correct answer to what type of depreciation it has. It really confused me because if adding a 2nd bath or even half bath would contribute to its value then this doesn't make sense.
What kind of Q&A was your test? multiple answers? True/False?
 
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