Depreciation

Definition: In appraisal, depreciation is the loss in an improvement's value from physical deterioration, functional obsolescence, or external influences.

Example

A worn roof is a physical issue; an inefficient floor plan is functional; an adverse off-site influence is external.

Keep the distinction clear

Tax depreciation is a separate cost-recovery concept. It does not require the property's market value to decline each year.

Related terms

Curable Depreciation · Incurable Depreciation · Cost-Depreciation Approach

Keep studying

Tax Depreciation: Land, Building Basis, and Recovery Periods

References: California DRE: appraisal and valuation concepts

Pronunciation (US): dih-pree-shee-AY-shuhn (capitals show stress)

Pronunciation reference: Merriam-Webster