What is the second step in the market extraction method regarding depreciation?

The second step in the market extraction method regarding depreciation involves subtracting the depreciated value from the reproduction cost. This process is crucial for determining how much value has been lost due to depreciation for a property.

In this method, after determining the reproduction cost—which is essentially what it would cost to reproduce the property as it is today—an appraisal professional must evaluate the accumulated depreciation. This accumulated depreciation reflects the loss in value over time due to factors such as physical wear and tear, functional obsolescence, or external economic conditions. By subtracting this depreciated value from the reproduction cost, the appraiser arrives at a more accurate representation of the current market value of the property.

This step is vital because it directly impacts the estimate of the property’s value and provides insight into its marketability. It is also important to recognize that accurately calculating depreciation is essential for interpreting market conditions and making informed decisions in real estate market analyses.