California Real Estate Practice Exam

All of the following are methods for estimating accrued depreciation, except the:

1. cost of reproduction method

2. economic method

3. engineering method

4. market analysis method

The correct answer is: cost of reproduction method

In the context of estimating accrued depreciation, the cost of reproduction method is typically used to determine the current cost to reproduce a property and then adjust this figure by accounting for depreciation factors. The other methods mentioned—economic, engineering, and market analysis—are valid techniques for estimating depreciation. The economic method looks at external factors that can affect property value, such as economic obsolescence due to changes in the neighborhood or market conditions. The engineering method involves a thorough analysis of the physical condition of a property, taking into account its structural integrity and any necessary repairs. The market analysis method considers comparable sales and the current market conditions to assess how depreciation affects value relative to similar properties. Since the cost of reproduction method does not estimate accrued depreciation but rather focuses on reproduction costs, it is the outlier here, contributing to the understanding of manageable depreciation but not as a direct method for estimating its extent.