David Saks: Depreciation : About the Money - About the House

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

Depreciation : About the Money - About the House


When we think of depreciation we usually think of three types of depreciation: physical depreciation, functional obsolescence and the good old external obsolescence, which might even be taken a step further and referred to as local obsolescence or economic obsolescence. If you can make a situation involving housedepreciation better, then we refer to that quality of depreciation as curable. On the other hand, if nothing can be done about the depreciation, in other words, there ain't nothin' we can do for that place Virginia, we call that incurable depreciation.

What about physical deterioration? Usually this is caused by damage to the house in the form of wear and tear, like peeling, flakey paint, termite infestation and damage to the wood, and bad floors. Two things can be considered here: Is the form of deterioration incurable or curable? If you can make a profit from the cost of fixing the place up we think of this as a curable condition. If the repair doesn't add any value to the home then it's a safe bet that it's incurable, although I'd like to hear from the appraisers on this one.

What about functional obsolescence? This is basically something that has to do with some part of the design of a home that's outlived it's usefulness. A common problem with the design of the home is that the design just simply becomes old and useless as the years pass. Most common example is a 17 bedroom home with one bathroom or an outhouse.outhouse

And now, finally, external obsolescence. This is something on the outside of the property that brings the value of the house down, such as a methane gas treatment facility across the street from the house.

Can you think of other types of obsolescense or deterioration that we deal with commonly?

David Saks

Time&Temp Memphis

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Comment balloon 4 commentsDavid Saks • June 15 2008 12:21AM


Ahh you're back- I seem to remember MEME'ing you a couple of weeks ago....now thats a MEME I'd like to read!............Obsolescence, deterioration, dysfunction........tonight I'm thinking more of relationships then of houses........but the outhouse does have special significance....

Posted by Liz Moras Migic, Chilliwack, British Columbia - Realtor about 12 years ago

LOL, Liz. Here's another example of functional obsolescence, Elvis' Jungle Room.

                                jungle room

Posted by David Saks ((retired)) about 12 years ago

and here i was thinking that it might be quite functional!  lol..........but i won't let my mind wander there....

Posted by Liz Moras Migic, Chilliwack, British Columbia - Realtor about 12 years ago

Liz, can't you see Elvis snacking on Peanut Butter and Banana sandwiches in the Jungle Room, and washing it down with grape soda? By the way, I remember a great band from Canada called Chilliwack back in the early 80's. They were great ! I wonder where they are now?

Posted by David Saks ((retired)) about 12 years ago

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