Which depreciation measurement method is frequently used for demonstration appraisal reports?

The observed condition, or breakdown method, is frequently employed in demonstration appraisal reports because it allows appraisers to assess the depreciation of a property by evaluating its physical condition and components. This method entails analyzing the individual elements of a property—such as the roof, HVAC systems, and plumbing—assigning an effective age to each, and estimating the remaining useful life of these components. By breaking down the property into its parts and examining their condition, appraisers can provide a clearer, more detailed picture of the overall depreciation.

This approach is particularly beneficial in demonstration reports, as it illustrates the appraiser's thought process and methodology in determining depreciation. It shows a thorough analysis, making it easier for stakeholders to understand how various factors contribute to the property's overall value.

Other methods, such as the modified economic age-life method, capitalize on general economic principles and averages, which can sometimes gloss over property-specific conditions. The sales comparison method focuses on market transactions, and while it can touch on depreciation through adjustments, it doesn’t provide as granular a detail as the observed condition method. Similarly, the capitalization method is more about converting income potential into value and is less suited to directly address physical depreciation in a detailed manner. Thus, the observed condition method stands out in the