VALUATION

COST APPROACH
Exercise 1:
Anne Appraiser is determining the value of a single family residential home that has an
actual age of 15 years, an estimated effective age of 10 years, and a remaining economic
life of 30 years. The replacement cost is $131,582. A two-car garage was added to the
property ten years ago and has an effective age of 7 years with a remaining economic life
of 18 years. The replacement cost is $29,581. An inground pool was installed 3 years
ago, with an effective age of 5 years and a remaining economic life of 12 years. The
replacement cost is $24,585. The home has an extensive wooden deck constructed 5
years ago, with an effective age of 5 years, and a remaining economic life of 15 years.
The replacement cost is $14,300. Wooden fencing completely encloses the rear yard area
and has an effective age of 3 years and a remaining economic life of 12 years. The
replacement cost is $8,748. Determine the total accrued depreciation.
Exercise 2:
Let's assume that we are about to appraise a house using the cost approach. The home
was originally constructed in the early 1900s and is one of the last of its kind in this area.
The cost of constructing an exact replica of this residence is estimated to be $350,000.
On our trip to the actual property, we notice that this is the only residential unit located on
this particular road. Based on the current usage of adjacent real estate, we estimate that
the property would be worth an additional $25,000 in its highest and best use. However,
due to the dramatic shift in the perceived safety of the neighborhood, values of any
remaining residential properties in the area have fallen by $20,000. Due to the home's
age, we also notice that there has been a significant amount of physical deterioration to
the building, amounting to an estimate of $50,000 in lost value. Since the home was built
over 100 years ago, the floor plan is quite obsolete relative to current preferences. This
has a detrimental effect on the value of the property that is estimated to be approximately
$15,000. Given this information, determine the appraised value of the home using the
cost approach.

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GVTH: TS. Lê Bảo Thy