Property Valuation
In Missouri, 'depreciation' in appraisal refers to:
AThe tax deduction for owning investment property
BA loss in property value from any cause✓ Correct
CThe annual decrease in assessed value
DMREC-approved value reductions
Explanation
In appraisal, depreciation is a loss in value from any cause: physical deterioration, functional obsolescence, or external obsolescence. It differs from accounting depreciation (tax deduction).
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Math Concepts
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