Texas Property Tax Consultant Practice Exam

What should an appraiser consider when determining depreciation?

1. Only structural issues of the property

2. All sources of depreciation

3. Only market conditions

4. Prevalence of economic conditions

The correct answer is: All sources of depreciation

When determining depreciation, an appraiser should consider all sources of depreciation because depreciation in real estate can arise from various factors that affect the property's value over time. This includes physical depreciation, which relates to the wear and tear or functional obsolescence of a property, as well as external factors such as economic conditions or changes in the neighborhood that could negatively impact the property's marketability. Physical depreciation is just one component; it reflects the deterioration due to wear from usage or environmental factors. Functional obsolescence addresses issues related to design, layout, or features that are no longer desirable. External obsolescence refers to the loss of value due to external factors, including economic downturns, changes in zoning laws, or community developments that may negatively impact the property. By taking into account all sources of depreciation, the appraiser can arrive at a more accurate and comprehensive assessment of the property's value, ensuring that the final appraisal reflects any reductions in market value resulting from multiple influences rather than just focusing on one aspect.