Depreciation Type

Residential Estimator has several methods of calculating depreciation. The depreciation method selected here, together with the other fields in this section of the form, determine how to set the physical or combined physical and functional depreciation percentage for the overall residence. This depreciation percentage is applied to all individual building components that you do not depreciate separately.

The available depreciation types are:

Method 1: M&S Depr. Tables & Typical Life: Use the Marshall & Swift tables in Section E of the Residential Cost Handbook to set both the Typical Life and the Depreciation Percentage as follows:
- Use the residence type, style and quality to set the Typical Life using the Typical Building Life table from Section E.
- Use this Typical Life together with the Effective Age entered to set a combined Physical/Functional Depreciation Percentage using the Depreciation table from Section E.

Method 2: M&S Depr. Tables, Entered Typical Life: Enter a Typical Life, and use it and Effective Age to set a combined Physical/Functional Depreciation Percentage using the Depreciation table from Section E of the Residential Cost Handbook.
Method 3: Age/Life (Straight Line): Use the Typical Life and Effective Age to calculate a combined Physical/Functional Depreciation Percentage using straight-line depreciation.
Method 4: Entered Percentages or Dollars: Use the combined Physical/Functional Depreciation Percentage, or the Physical Depreciation Percentage, entered in the appropriate fields, or use the lump-sum Dollar Amounts entered.
Method 5: None: Do not set an overall depreciation percentage for the residence (i.e., do not automatically depreciate any components). With this method you can, however, depreciate individual building components by entering a depreciation percentage of age and life for them.
Method 6: M&S Depr. Tables & Typical Life, Condition Adjustment.: Calculate the Physical/Functional Depreciation Percentage using method 1, then adjust the resulting percentage based on the condition.

The condition adjustment multipliers are:

Condition Adjustment Multiplier
Worn Out 1.15
Badly Worn 1.10
Average 1.00
Good 0.90
Very Good 0.85
Excellent 0.80

Example: If the calculated physical/functional depreciation percentage is 25% and the condition is good, the adjusted percentage is 22.5% (25% times 0.90).

Note: You should only use this method if you enter the Actual Age of the residence in the Effective Age field. Use method 1 if you enter the Effective Age, the determination of which is partially based on the condition of the residence.