What are the three main types of depreciation considered in property valuation?

The three main types of depreciation considered in property valuation are physical depreciation, functional depreciation, and external depreciation. Each type addresses different factors that can lead to a reduction in property value over time.

Physical depreciation refers to the loss of value due to wear and tear on a property as it ages. This can include deteriorating building materials, aging systems, or general neglect, leading to a tangible decline in physical condition.

Functional depreciation arises from changes in market preferences or technology that render certain features of a property less desirable or obsolete. For example, an older home might have a layout that is no longer popular, or it may lack modern conveniences, impacting its overall value.

External (or economic) depreciation involves the loss of value due to factors outside the property itself, such as changes in the surrounding neighborhood, economic downturns, or other external conditions that negatively affect property value.

The most accurate answer reflects a clear understanding of these three main types of depreciation relevant to property valuation, as they all focus on different aspects impacting the worth of the property.