In real estate appraisal, the Breakdown Method is a comprehensive approach used to divide accrued depreciation into distinct categories: physical depreciation, functional obsolescence, and economic obsolescence. This method contrasts with the age-life method of depreciation.
Depreciation (Appraisal) is a charge against the reproduction cost (new) of an asset for the estimated wear and obsolescence. This type of depreciation can be categorized as physical, functional, or economic.
Economic obsolescence refers to the decrease in property value caused by external factors, such as environmental changes or new developments. It is also known as external obsolescence or environmental obsolescence.
Environmental Obsolescence refers to a form of depreciation in property value due to external, environmental factors that negatively impact its desirability and usability.
External obsolescence, also known as economic obsolescence, refers to the depreciation in the value of a property due to external factors beyond the property owner's control, such as changes in the neighborhood, economic conditions, or local regulations.
Locational Obsolescence, also known as Economic Obsolescence, refers to the depreciation or loss in property value due to external factors related to its location, which are beyond the control of property owners.
Obsolescence in real estate refers to a loss in property value due to reduced desirability and usefulness of a structure because its design and construction are outdated. This can result from various factors such as changes in design preferences, technological advancements, or geographic shifts.
