Economic Life Effective age is the age indicated by the condition and utility of a structure. Remaining economic life is the estimated period during which improvements continue to contribute to property value. Effective age often approximates actual age, particularly with newer properties. Effective age, however, may be less than or greater than actual age depending upon the level of maintenance, quality, design, and demand for that type of structure. Accrued depreciation is a function of effective age.
Deterioration is evidenced by wear and tear.
Functional obsolescence is caused by internal property characteristics such as a poor floor plan, superadequacy, etc. External obsolescence is caused by conditions outside a property, such as the lack of economic demand or shifts in property-use patterns. Using replacement cost eliminates the need to estimate some forms of functional obsolescence. Consideration of effective age and the use of local cost modifiers also eliminate the need to estimate some forms of external obsolescence. Other forms of functional and external obsolescence must be accounted for separately.