Age-Life Method
The simplest depreciation technique: effective age divided by total economic life, applied to cost new. A 15-year effective age over a 60-year life indicates 25% depreciation.
Related Terms
Effective Age
The age of a property as indicated by its condition, maintenance, and updates, which may differ from its actual (chronological) age.
Economic Life
The period over which improvements contribute value to the property — ending not when the building collapses, but when it no longer adds value above land.
Accrued Depreciation
The total loss in value from all causes — physical deterioration, functional obsolescence, and external obsolescence — measured as the difference between cost new and the improvements' current contributory value..
Cost Approach
A valuation method that estimates value by calculating the cost to reproduce or replace the improvements, subtracting accrued depreciation, and adding the land value.
More in Valuation Approaches
View allSales Comparison Approach
A valuation method that estimates a property's value by comparing it to similar properties that have recently sold in the same market area.
Income Approach
A valuation method that estimates a property's value based on the income it generates or is expected to generate.
Market Value
The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus..
Reconciliation
The process by which an appraiser evaluates and weighs the results from the different valuation approaches (sales comparison, cost, and income) to arrive at a final opinion of value..