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Breakdown Method
By Contributor 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.
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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:
- Physical depreciation
- Functional obsolescence
- 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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