Depreciation (Appraisal)
In appraisal, a loss in value from physical deterioration, functional obsolescence, or external obsolescence.
In appraisal, depreciation is any loss in value of the improvements from three causes. Physical deterioration is wear and tear. Functional obsolescence is outdated design or features. External obsolescence is a loss caused by forces outside the property, such as a nearby highway or landfill.
External obsolescence is generally incurable because the owner cannot control the outside cause. This appraisal meaning is different from the tax or accounting sense of depreciation.
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This definition is Texas real estate exam-prep education, not legal, tax, or professional advice. Verify current rules against the official source before relying on them for a real transaction. Back to the full glossary.