What is a common type of depreciation recognized in appraisals?

Functional obsolescence is a common type of depreciation recognized in appraisals. This form of depreciation occurs when a property’s design or features become less desirable due to changes in preferences, technology, or market demands. For instance, if a residential property has outdated appliances or an inefficient layout that does not meet modern standards or buyer expectations, it may suffer from functional obsolescence. Appraisers identify this type of depreciation to estimate a more accurate value of the property, considering how these factors can negatively impact its marketability.

On the other hand, the other options do not correctly describe commonly recognized types of depreciation in appraisals. Market appreciation refers to the increase in property value due to general market conditions, which is the opposite of depreciation. Physical promotion does not exist as a recognized term in appraisal vocabulary; it might imply a positive influence but does not address value reduction. Lastly, investment enhancement is also not formally recognized in appraisal as a type of depreciation, as it suggests an increase in value rather than a decrease. Thus, functional obsolescence remains a key concept in identifying specific reasons for depreciation within property appraisals.