What does depreciation refer to in property appraisal?

Depreciation in property appraisal specifically refers to the reduction in value of a property over time due to various factors, including physical wear and tear, functional obsolescence, or external economic conditions. This concept is essential for appraisers to understand as they assess the value of a property.

When properties age or experience changes in the market or surrounding area, they can lose value, and it's the appraiser's job to quantify this loss through depreciation. This helps to provide a more accurate assessment of a property's current market value, reflecting its actual condition and the impact of time and external factors.

Understanding depreciation allows for a comprehensive analysis of a property’s total value. It is crucial in ensuring that appraisals are reflective of not just the current real estate market trends but also the intrinsic changes to the property itself over time.