Which method is used to measure depreciation using an effective age calculation?

The modified age-life method is used to measure depreciation by calculating effective age, which is an essential factor in determining how much value a property has lost over time due to wear and tear, obsolescence, or other factors. This method considers the property's total economic life and compares it to its effective age, which may differ from its actual chronological age.

In this method, the appraiser estimates the total life of the building and the effective age based on its current condition and maintenance level. The formula employed involves dividing the effective age by the total economic life to derive the percentage of depreciation. This percentage is then applied to the building's replacement cost to determine its depreciated value.

This approach is particularly useful because it provides a nuanced measurement of depreciation based on actual property condition rather than simply a fixed rate applied to an estimated lifespan. Understanding effective age allows appraisers to offer a more accurate reflection of a property's worth in the current market context.