What are the three types of depreciation in real estate appraisal?

The correct answer highlights the three recognized types of depreciation in real estate appraisal: physical deterioration, functional obsolescence, and external obsolescence.

Physical deterioration refers to the wear and tear on a property that occurs over time due to use and exposure to the elements. This can manifest as issues like peeling paint, roof leaks, or outdated systems, all of which can negatively impact the property’s value.

Functional obsolescence relates to a decrease in property value due to outdated features or a layout that no longer meets current buyer preferences. For example, a house with an insufficient number of bathrooms for modern standards may experience functional obsolescence because it does not meet market expectations.

External obsolescence occurs when a property suffers a loss in value due to external factors, often beyond the control of the property owner. This can include negative changes in the environment outside the property, such as increased crime in the area, the construction of undesirable commercial developments nearby, or changes in zoning laws.

In contrast, the other choices do not correctly represent the types of depreciation. Market value, assessed value, and replacement cost refer to methods of valuation rather than types of depreciation. Functional obsolescence, age-life, and economic obsolescence include terms that are not all