Real Estate Appraisal Practice Exam

Depreciation in real estate appraisal is defined as a decrease in property value due to various factors. This decrease can stem from a variety of influences such as age, economic conditions, external factors, or physical deterioration. Understanding depreciation is crucial for appraisers, as it directly affects a property's market value and assists in determining a fair price during sales or rental assessments.

When properties age, they may undergo physical wear and tear, making them less desirable compared to newer properties or those that have been well-maintained. Additionally, changes in local economic conditions, shifts in neighborhood desirability, and alterations in zoning laws can contribute to a decline in value over time. Properly assessing depreciation helps in accurately reflecting the present condition of property and its investment potential, which is essential for both buyers and sellers in the market.