What term describes the difference between the market value of an improvement and its cost at the time of appraisal?

The term that describes the difference between the market value of an improvement and its cost at the time of appraisal is depreciation. This concept is central to real property appraisal, as it reflects the decrease in value of an asset over time due to various factors such as wear and tear, obsolescence, or changes in market conditions.

When appraisers evaluate property, they consider not just the cost to build or improve a structure, but also its current market value, which can be affected by the condition of the improvement and external economic factors. Depreciation quantifies that difference, illustrating how improvements may lose value despite their original cost. This is crucial for appraisers when determining the fair market value of a property, as it ensures that valuations are realistic and reflect current market conditions.

Other terms like appreciation refer to an increase in value, while market adjustment and value adjustment are not standard terms used to describe the specific difference between cost and market value in the context of depreciation. Understanding these distinctions is key for effective property appraisal.