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Pass California

Valuation and Analysis, 14% of the examination

Depreciation in appraisal

Loss in value from physical deterioration, functional obsolescence, or external obsolescence.

Appraisal depreciation is accrued loss in value, not the accounting deduction used on a tax return. Physical deterioration concerns condition, functional obsolescence arises from design or utility within the property, and external obsolescence comes from outside influences.

See also

Functional obsolescenceLoss in value from a defect inside the property boundary, such as an outdated floor plan.External obsolescenceLoss in value caused by an influence outside the property, generally treated as incurable in exam questions.Cost approachA valuation method adding land value to replacement or reproduction cost new, less accrued depreciation.

Test the distinction

A relevant question from Valuation and Analysis, selected because its facts or explanation use this concept.

Valuation and Analysis ยท 14%Methods of Estimating Value

Which appraisal approach begins with the cost to build new and then subtracts depreciation?

Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanor under B&P Code section 123.

Primary sources

Use these authorities when a course summary, forum answer, or older flashcard conflicts with the current California rule.

Where this is tested

Property Valuation and Financial AnalysisAll three official DRE valuation topics in one practical guide: value principles, the sales comparison, cost and income approaches, and the financial analysis that turns property data into a defensible answer.14%Practice Valuation and Analysis28 questions on this area, every option explained.Practice

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