Property Valuation
What is 'depreciation' as used in real property appraisal (distinct from tax depreciation)?
AThe IRS-approved tax deduction a property investor claims annually on investment property
BAny loss in property value from any cause, including physical deterioration, functional obsolescence, and external obsolescence✓ Correct
CThe annual decline in assessed value established by the county assessment office
DThe reduction in property value attributed to general economic inflation over time
Explanation
In real estate appraisal, depreciation is any loss in property value from any cause. There are three types: physical deterioration — wear and tear, either curable like peeling paint or incurable like structural failure; functional obsolescence — outdated features, either curable like old appliances or incurable like a poor floor plan; and external or economic obsolescence — outside factors like a nearby highway or declining neighborhood, which are always incurable.
Related Pennsylvania Property Valuation Questions
- The cost approach to value estimates a property's value by:
- In Pennsylvania, what is the 'assessed value ratio' (CLR) and how does it affect property tax appeals?
- An appraiser in Allegheny County (Pittsburgh) must obtain market data for the subject neighborhood's:
- The principle of conformity holds that:
- The cost approach to value is most useful when appraising:
- Highest and best use analysis considers which four criteria?
- External (economic) obsolescence is different from functional obsolescence because it:
- USPAP (Uniform Standards of Professional Appraisal Practice) requires Pennsylvania appraisers to:
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