Which method of estimating depreciation is the most detailed and required for demonstration appraisal reports?

The Observed Condition Method is the most detailed approach for estimating depreciation in appraisal reports because it involves a thorough analysis of the property's actual physical condition, age, and the specific factors contributing to depreciation. This method requires a hands-on inspection of the property, allowing appraisers to assess the remaining useful life of individual components and determine how much value has been lost due to physical deterioration, functional obsolescence, and external obsolescence.

Using this method, appraisers can identify issues like wear and tear, changes in market conditions, or outdated features that might affect a property's value more accurately than other methods. It provides a clear, evidence-based framework for reporting, making it particularly effective for demonstration appraisal reports where detailed justifications for value estimates are crucial. By systematically documenting the conditions that influence depreciation, the Observed Condition Method presents a robust rationale that can withstand scrutiny, ensuring that the appraiser’s conclusions are well-founded and supportable.