Depreciation
Effective age
The age a property appears to be from its condition rather than from its build date
A building that has been maintained and updated carries an effective age below its actual age; a neglected one carries an effective age above it. Appraisers work in effective age precisely because two properties built in the same year can be in entirely different condition, and only one of those two ages responds to a new roof.
Easily confused with
Actual age is chronological and comes off the records. Effective age is a judgment about condition, and the gap between the two is what an appraiser is being paid for.
How the exam asks about it
The cost-approach shortcut divides effective age by total economic life and applies the fraction to the cost new. Substituting actual age is the error the item is built around.
Quick check: Effective age
One question. Pick an answer to see the explanation.
Which term is being defined: “The age a property appears to be from its condition rather than from its build date”?
Related terms
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