Property Valuation
What is 'depreciation' in real estate appraisal and what are its three types?
ADepreciation is the annual tax deduction for owning property; types are straight-line, MACRS, and bonus depreciation
BDepreciation is a loss in value from any cause; the three types are physical deterioration, functional obsolescence, and external (economic) obsolescence✓ Correct
CDepreciation only applies to commercial properties appraised in Nevada
DDepreciation is only caused by physical damage; types are curable and incurable
Explanation
In appraisal, depreciation is any loss in value from its replacement cost. Physical deterioration is wear and tear (cracked foundation, peeling paint). Functional obsolescence is outdated design (no garage, poor floor plan). External/economic obsolescence is caused by outside forces (noisy freeway, declining neighborhood). Each type can be curable (worth fixing) or incurable (not cost-effective to fix), affecting the property's final appraised value.
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