- CFA Exams
- CFA Level I Exam
- Study Session 15. Alternative Investments
- Reading 39. Private Real Estate Investments
- Subject 5. The cost and sales comparison approaches to valuation
CFA Practice Question
An office building has exterior and interior walls partially constructed with concrete block and wood frame and stucco. However, the market does not recognize superior construction of concrete block with increased rents, hence the excess cost is super-adequate. This is an example of:
A. Physical deterioration.
B. Functional obsolescence.
C. Economic obsolescence.
Explanation: Incurable functional obsolescence.
User Contributed Comments 3
| User | Comment |
|---|---|
| alejandroc | Did not understand this question. Explain more! |
| arjnath | The additional superior concrete block doesnt get valued by Increased rents as the market deems it not to have any additional functional use or value Hence functional obsolescence |
| BradRoss | is this not economic obsolescence? |