Define “depreciation” in real estate appraisal.

Depreciation in real estate appraisal refers specifically to a decrease in property value that can result from various factors. These factors may include the physical deterioration of a property due to age, wear and tear, and even changes in the economic environment that affect demand and thus valuation. For instance, a building might lose value over time as it requires repairs or as newer, more modern buildings are constructed nearby, influencing market conditions.

This definition of depreciation underscores the importance of evaluating a property’s condition and the broader economic context when determining its value. Understanding depreciation helps appraisers make accurate assessments and inform stakeholders about potential impacts on value over time. Recognizing the nuances of depreciation allows for more effective property management and investment strategies.