What is the term for estimating each type of depreciation separately?

The practice of estimating each type of depreciation separately is commonly referred to as the breakdown method. This approach allows for a more nuanced evaluation of a property’s overall depreciation by analyzing and quantifying different kinds of depreciation that may be affecting the value of the property, such as physical deterioration, functional obsolescence, and external obsolescence.

When using the breakdown method, appraisers can isolate these various types of depreciation and apply different rates or patterns of depreciation pertinent to each. This results in a more precise assessment of a property's market value.

The observed condition method, on the other hand, focuses on identifying the actual physical condition of a property without necessarily separating depreciation into different categories. The capitalization method primarily concerns income-producing properties and is used to estimate the value based on the income generated, rather than focusing on types of depreciation.

Thus, while the breakdown method is the primary terminology for estimating each type of depreciation separately, the mention of both observed condition and breakdown method as valid options may confuse the direct association with the breakdown method specifically for this purpose. The capitalization method does not pertain to the concept of depreciation estimation in the same manner as the breakdown method does.