Certified Pennsylvania Evaluator Practice Exam

Which method is used to assess the total economic value of a property?

1. Breakdown method

2. Economic age-life method

3. Capitalization of income method

4. Sales comparison approach

The correct answer is: Economic age-life method

The economic age-life method is a widely accepted approach for assessing the total economic value of a property. This method is based on the principle that the value of a property can be determined by examining its effective age in relation to its total economic life. By estimating how long a property can provide economic benefits and comparing its remaining useful life with its total lifespan, appraisers can derive a value that reflects both depreciation and the current market conditions. This technique is particularly useful when evaluating properties that are not easily compared with others, as it allows for an assessment rooted in the physical condition and longevity of the structure. The economic age-life method provides an estimation that combines both the physical deterioration of the property and the characteristics of the real estate market, giving a well-rounded view of the property's value. In contrast, the other methods mentioned, such as the breakdown method, capitalization of income method, and sales comparison approach, focus on different aspects of property valuation. Each has its own framework but may not offer a comprehensive assessment of a property’s total economic value like the economic age-life method does.