Exam 12: Estimating Loss in Value: Accrued Depreciation

A gross income multiplier is used to estimate loss in value by the cost-to-cure method.

The capitalized income method can be used to estimate either the amount of accrued depreciation from all causes, or that from a single cause.

A misplaced improvement suffers from functional obsolescence.

Accrued depreciation can be defined in appraisal terms as the total loss in value from all causes.

Economic obsolescence is caused by factors outside the property.

Allowable deduction from book value is one of the four basic appraisal methods for measuring accrued depreciation.

Depreciation is usually classified as incurable if it is not economically feasible to correct the condition(s) causing the loss in value.

A 50-year-old building with a total life expectancy of 100 years should be depreciated at 50%, regardless of its effective age.

When you base your depreciation estimate on the "effective age" of the building rather than the actual age, you are relying on an estimate of the market's view of the property.

The sales data or market method is the most direct way to estimate loss in value.