Property Valuation
In the cost approach to value, what is 'accrued depreciation'?
AA. The total amount of mortgage principal paid down over time
BB. The total loss in value from all causes (physical deterioration, functional obsolescence, external obsolescence) since the improvement was built✓ Correct
CC. The tax depreciation taken on the property each year
DD. The decrease in land value over time
Explanation
Accrued depreciation in appraisal is the total loss in value from all causes: physical deterioration (wear and tear), functional obsolescence (outdated design), and external/economic obsolescence (factors outside the property). It is subtracted from the replacement/reproduction cost new to estimate current improvement value.
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