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Complete glossary lessonNational exam concept

Depreciation

In appraisal, depreciation is loss in value from any cause.

Official area

Valuation and Market Analysis

Knowledge cluster

Valuation foundations

Learning sequence

Define, distinguish, apply, retrieve

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Exam purpose

Recognize the rule, then reject the nearest look-alike.

Georgia lens

Apply the state distinction only when the facts call for it.

Connected terms

Connected to 4 terms and one official content area.

What does Depreciation mean in real estate?

In appraisal, depreciation is loss in value from any cause. It is commonly classified as physical deterioration, functional obsolescence, or external obsolescence.

How is Depreciation different from the closest exam answer?

Appraisal depreciation measures value loss. Accounting or tax depreciation allocates cost under financial or tax rules and is not the same calculation.

What is the Georgia-specific rule?

The national valuation rule applies in Georgia. Location-based loss from a nearby nuisance is external obsolescence, even though the building itself may be well maintained.

Worked exam example

Scenario

A house loses value because a noisy industrial facility opens next door. The cause is outside the property and is external obsolescence.

Decision rule

Appraisal depreciation measures value loss. Accounting or tax depreciation allocates cost under financial or tax rules and is not the same calculation.

What is the most common exam trap?

Trap correction

Age is not automatically depreciation. A well-maintained older improvement may have limited physical deterioration, while a newer design can have functional obsolescence.

Memory cue: Age is not automatically depreciation.

Original exam check

Apply the definition

Which statement correctly explains Depreciation?

Mastery tracker

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Related terms to learn next

Appraisal

An appraisal is an independent, supportable opinion of value developed by a qualified appraiser for a stated property interest, effective date, intended use, and set of assignment conditions.

Highest and best use

Highest and best use is the reasonably probable use of land or improved property that is legally permissible, physically possible, financially feasible, and maximally productive.

Fair market value

Fair market value is the amount a knowledgeable, willing buyer and seller would agree upon in an arm's-length transaction when neither is compelled and both have reasonable exposure to the market.

Effective gross income

Effective gross income, or EGI, is potential gross income minus vacancy and collection loss, plus other property income.

Recommended next complete lesson

Continue with Valuation and Market Analysis complete lesson. It places this term inside the full rule, worked examples, exam traps, and mixed practice required for mastery.
Previous termHighest and best useNext term Net operating income

Depreciation quick answers

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Editorial standards.

What is Depreciation?

In appraisal, depreciation is loss in value from any cause.

What is Depreciation commonly confused with?

Appraisal depreciation measures value loss. Accounting or tax depreciation allocates cost under financial or tax rules and is not the same calculation.

How does Georgia treat Depreciation?

The national valuation rule applies in Georgia. Location-based loss from a nearby nuisance is external obsolescence, even though the building itself may be well maintained.