Breakdown Method | Propertylogy

Breakdown Method

By on October 2, 2018

The breakdown method is a process used during home appraisal that separate depreciation into different components, each assigned to a weightage to it, to derive the depreciated value of a property.

The intention of such methods of calculation is not to determine the depreciation value for accounting or tax purposes.

It is used for estimating the current value of improvements made to the house which will be indicated in the appraisal report.

Because there are 3 primary types of property depreciation namely:

  1. Physical depreciation
  2. Functional obsolescence
  3. Economic obsolescence

Using the breakdown method is preferred for appraisers to make a more accurate judgement of how much depreciation would actually affect the value of property.

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