Property Valuation
Accrued depreciation in the cost approach means:
AThe tax deduction allowed for capital improvements
BThe total loss in value from all causes (physical, functional, and external) since construction✓ Correct
CThe annual depreciation charge on an income tax return
DDepreciation scheduled for future periods
Explanation
Accrued depreciation in appraisal is the total loss in value from all causes (physical deterioration, functional obsolescence, and external obsolescence) as of the date of appraisal. It is subtracted from the reproduction or replacement cost new to arrive at the depreciated cost of improvements.
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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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