Which of the following correctly identifies the three types of depreciation recognized in real estate appraisal?
Correct Answer
A) Physical deterioration, functional obsolescence, and external obsolescence
The three types of depreciation in real estate appraisal are: (1) Physical deterioration — loss in value due to wear and tear, deferred maintenance, or aging of the structure; (2) Functional obsolescence — loss in value due to outdated or inadequate features, such as an outdated floor plan or obsolete fixtures; and (3) External (economic) obsolescence — loss in value caused by factors outside the property, such as a nearby highway, environmental hazard, or declining neighborhood. Physical deterioration and functional obsolescence may be curable or incurable, while external obsolescence is typically incurable.
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