Physical deterioration is classified under which appraisal concept?

Physical deterioration refers to the wear and tear that properties experience over time due to factors such as age, environmental exposure, or lack of maintenance. This concept falls under accrued depreciation in the appraisal process, which accounts for the loss in value of a property due to physical deterioration, functional obsolescence, and external obsolescence.

Accrued depreciation is a critical component of property valuation because it helps appraisers determine the current market value of a property by assessing how much value has been lost since its original construction. This concept is essential for accurate property assessments, especially for underwriting and real estate taxation.

In contrast, future value estimation considers anticipated increases in value over time, while market analysis focuses on assessing the value of properties based on current market conditions without specifically addressing the depreciation caused by physical factors. The cost approach summary involves determining the cost to replace a property, which also does not directly address the accumulated impacts of deterioration. Therefore, understanding physical deterioration as part of accrued depreciation is vital in the appraisal process.