Agenda - 09-02-2008 - 4e - Laserfiche WebLink

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Physical depreciation is a relatively steady process, with lower quality buildings generally deteriorating faster than better ones. However, neither physical decline nor obsolescence are constant in their action. Deterioration may be offset periodically by maintenance, worn-out elements of the building being repaired or replaced at intervals depending upon the policy of the owner. Obsolescence may come slowly, or happen almost overnight, due to economic or environmental changes. The forces which cause both physical depreciation and _obsolescence may act, and often do act, simultaneously, but they are not necessarily directly related. A building may decline in physical condition and yet throughout its entire life remain relatively functional and free of undesirable environmental influences. Conversely, it may lose its desirability, or its utility, before any appreciable physical deterioration is evident. Obviously, age alone is an unreliable indicator of the degree of a building's depreciation from its cost new. However, a certain number of buildings will receive "normal" obsolescence. These buildings will depreciate at an "average" rate as they grow older. Thus, the age of a building remains an important factor in estimating depreciation. Typical/average depreciation can be increased or decreased by quality of construction and maintenance, with higher quality construction and better maintenance depreciating more slowly than lower quality construction that isn't well cared for. Typical/average depreciation for the first 5 - 10 years will be between one percent and two percent per year. After that typical/average depreciation as applied will tend to be between .30 percent to .70 percent per year. Improvements with depreciations exceeding 32 percent that have not been site visited will keep their current physical depreciation until site visited. Any questions of physical depreciation, obsolescence or any kind of depreciation will be determined by site visitation. Estimating Depreciation An estimate of depreciation represents an opinion of the appraiser as to the degree that the present and future appeal of a property has been diminished by deterioration and obsolescence. Of the three estimates necessary to the cost approach, it is the one most difficult to make. The accuracy of the estimate will be a product ' of the !