Which type of depreciation is illustrated by an aging roof or outdated HVAC system?

The correct response highlights Physical Depreciation, which occurs as a result of physical deterioration of a property over time. This type of depreciation reflects the wear and tear that occurs through age and use, which is precisely illustrated by an aging roof or an outdated HVAC system. Such physical components can deteriorate due to exposure to the elements, lack of maintenance, or passage of time, leading to diminished functionality and value of the property.

In contrast, Functional Depreciation refers to a decrease in value due to inherent inefficiencies in a property’s design or features, such as having a poor layout or outdated fixtures that do not meet current market expectations. External Depreciation relates to factors outside the property itself, like changes in the surrounding neighborhood or economic conditions impacting property values. Market Depreciation encompasses overall property value trends based on market conditions rather than physical conditions of specific components. Each of these other forms of depreciation has distinct characteristics that make them different from Physical Depreciation, which is why the aging roof or outdated HVAC system exemplifies this particular type.