What is defined as the application of physical depreciation and functional obsolescence?

What is defined as the application of physical depreciation and functional obsolescence?

• A. Value depreciation
• B. Property deterioration
• C. Market erosion
• D. Investment decline

Answer: (B)

The term that encompasses both physical depreciation and functional obsolescence is property deterioration. Physical depreciation refers to the loss of value from physical wear and tear due to age, use, or neglect of a property, while functional obsolescence denotes a decrease in a property's desirability or utility due to outdated features or changes in market preferences, even if the structure itself remains intact. When considering property valuation, understanding property deterioration is crucial as it combines these two concepts into a single framework that helps assess the overall decline in a property's value. This comprehensive view allows property appraisers, investors, and real estate professionals to make informed decisions related to property maintenance, upgrades, and investment potential.

The term that encompasses both physical depreciation and functional obsolescence is property deterioration. Physical depreciation refers to the loss of value from physical wear and tear due to age, use, or neglect of a property, while functional obsolescence denotes a decrease in a property's desirability or utility due to outdated features or changes in market preferences, even if the structure itself remains intact.

When considering property valuation, understanding property deterioration is crucial as it combines these two concepts into a single framework that helps assess the overall decline in a property's value. This comprehensive view allows property appraisers, investors, and real estate professionals to make informed decisions related to property maintenance, upgrades, and investment potential.