In relation to personal property appraisals, what does the term 'depreciation' refer to?

The term 'depreciation' specifically refers to the loss of value over time, particularly in the context of personal property appraisals. This concept signifies how the worth of an asset declines due to various factors such as wear and tear, obsolescence, or changes in market conditions. In personal property appraisals, understanding depreciation is crucial for determining the fair market value of an asset, especially for items that have a finite useful life or are subject to physical deterioration.

For instance, a vehicle typically depreciates as it ages and accumulates mileage, reducing its resale value. Recognizing depreciation allows appraisers to provide a more accurate assessment of an asset's current worth, reflecting its condition and the expected decrease in value over time. This understanding is essential for appraisers, buyers, and sellers involved in transactions related to personal property.