IAAO Course 201 – Residential Cost
Approach Exam Questions And Correct
Answers (Verified Answers) Plus Rationales
2026 Q&A | Instant Download Pdf
1. Which of the following best describes the cost approach to value?
a) Relies on recent sales of similar properties
b) Estimates the cost to replace or reproduce the improvements
minus depreciation, plus land value
c) Uses only the income generated by the property
d) Focuses on zoning regulations
The cost approach estimates value based on the current cost to
construct the improvements, accounting for depreciation, then
adds the land value.
2. Which type of depreciation is caused by wear and tear?
a) Functional obsolescence
b) External obsolescence
c) Physical deterioration
d) Economic obsolescence
Physical deterioration refers to loss in value from the normal wear
and tear of the property over time.
3. Functional obsolescence can be caused by:
a) Poorly maintained roof
, b) Neighborhood decline
c) Outdated floor plan or inefficient design
d) Severe weather damage
Functional obsolescence occurs when a property’s design, layout,
or features are no longer desirable or efficient.
4. External obsolescence is:
a) Loss of value due to outdated plumbing
b) Loss of value due to factors outside the property, like nearby
industrial development
c) Depreciation due to age
d) Inefficient floor plan
External obsolescence is caused by negative influences outside the
property lines that affect value.
5. Which of the following is considered a reproducible cost?
a) Cost to build an exact duplicate using modern materials
b) Cost to replace using modern equivalent materials
c) Land acquisition cost
d) Market sales comparison
Reproducible cost estimates the cost to build an exact physical
replica of the structure.
6. Replacement cost differs from reproduction cost because
replacement cost:
a) Uses only labor costs
b) Includes land value
c) Estimates cost to build a structure with the same utility using
modern materials
d) Ignores depreciation
, Replacement cost focuses on utility equivalence, not exact
duplication.
7. Which method is commonly used to estimate replacement or
reproduction cost in residential properties?
a) Sales comparison method
b) Unit-in-place method
c) Income capitalization
d) Gross rent multiplier
The unit-in-place method breaks down costs by individual
components of the building.
8. The square-foot method estimates cost based on:
a) Lot size
b) Total area of the building multiplied by a cost per square foot
c) Number of rooms only
d) Market rents
The square-foot method multiplies the building area by a cost per
square foot for the type of construction.
9. Which factor is NOT typically included in cost manuals for
residential construction?
a) Materials
b) Labor
c) Historical appreciation rates
d) Building type and quality
Cost manuals focus on current construction costs, labor, materials,
and type/quality, not past appreciation.
10. Curable depreciation means:
a) Cost to correct is less than the resulting increase in value
Approach Exam Questions And Correct
Answers (Verified Answers) Plus Rationales
2026 Q&A | Instant Download Pdf
1. Which of the following best describes the cost approach to value?
a) Relies on recent sales of similar properties
b) Estimates the cost to replace or reproduce the improvements
minus depreciation, plus land value
c) Uses only the income generated by the property
d) Focuses on zoning regulations
The cost approach estimates value based on the current cost to
construct the improvements, accounting for depreciation, then
adds the land value.
2. Which type of depreciation is caused by wear and tear?
a) Functional obsolescence
b) External obsolescence
c) Physical deterioration
d) Economic obsolescence
Physical deterioration refers to loss in value from the normal wear
and tear of the property over time.
3. Functional obsolescence can be caused by:
a) Poorly maintained roof
, b) Neighborhood decline
c) Outdated floor plan or inefficient design
d) Severe weather damage
Functional obsolescence occurs when a property’s design, layout,
or features are no longer desirable or efficient.
4. External obsolescence is:
a) Loss of value due to outdated plumbing
b) Loss of value due to factors outside the property, like nearby
industrial development
c) Depreciation due to age
d) Inefficient floor plan
External obsolescence is caused by negative influences outside the
property lines that affect value.
5. Which of the following is considered a reproducible cost?
a) Cost to build an exact duplicate using modern materials
b) Cost to replace using modern equivalent materials
c) Land acquisition cost
d) Market sales comparison
Reproducible cost estimates the cost to build an exact physical
replica of the structure.
6. Replacement cost differs from reproduction cost because
replacement cost:
a) Uses only labor costs
b) Includes land value
c) Estimates cost to build a structure with the same utility using
modern materials
d) Ignores depreciation
, Replacement cost focuses on utility equivalence, not exact
duplication.
7. Which method is commonly used to estimate replacement or
reproduction cost in residential properties?
a) Sales comparison method
b) Unit-in-place method
c) Income capitalization
d) Gross rent multiplier
The unit-in-place method breaks down costs by individual
components of the building.
8. The square-foot method estimates cost based on:
a) Lot size
b) Total area of the building multiplied by a cost per square foot
c) Number of rooms only
d) Market rents
The square-foot method multiplies the building area by a cost per
square foot for the type of construction.
9. Which factor is NOT typically included in cost manuals for
residential construction?
a) Materials
b) Labor
c) Historical appreciation rates
d) Building type and quality
Cost manuals focus on current construction costs, labor, materials,
and type/quality, not past appreciation.
10. Curable depreciation means:
a) Cost to correct is less than the resulting increase in value
