Appraisal Counseling Practice Exam 2025 – Comprehensive Study Guide

Physical depreciation refers to the reduction in property value that occurs as a result of wear and tear over time. This deterioration can stem from various factors, including age, exposure to the elements, and lack of proper maintenance. As a property experiences physical changes—such as peeling paint, weathered roofing, or worn-out flooring—its overall condition declines, leading to a decrease in market value.

Understanding physical depreciation is crucial in the appraisal process because it helps determine a property's current worth compared to newer or well-maintained alternatives. It highlights the importance of regular maintenance and repairs to preserve a property's value over time. The other choices describe different aspects of property value that do not directly relate to the concept of physical depreciation: enhancements and renovations typically increase value, while market fluctuations pertain to economic conditions rather than physical property condition.