California Real Estate Practice Exam

Which of the following appraisal methods requires a computation for "accrued depreciation"?

1. All of the above

2. Cost

3. Income

4. Market data

The correct answer is: All of the above

The appraisal method that requires a computation for "accrued depreciation" is the cost approach. This approach assesses the value of a property by calculating the cost to replace it, and then adjusting that cost by deducting any accumulated depreciation. Accrued depreciation accounts for the loss in value due to wear and tear, functional obsolescence, or external factors that may affect the property’s worth over time. The income method, while it assesses the potential for generating revenue from the property, does not typically factor in accrued depreciation in the same direct manner. It focuses more on the present value of future income streams generated by the property. The market data approach primarily compares similar properties that have recently sold in the area and relies on current market conditions rather than considering depreciation explicitly. Thus, the cost approach is distinct in its need for calculating accrued depreciation, making the assertion that all methods require this computation inaccurate. The answer is confirmed as correct in acknowledging that accrued depreciation is particularly relevant to the cost approach of property appraisal.