OverviewUse the Depreciation screen to enter or select the following for the overall residence: |
Related TopicsEstimate Navigation Menu (left side of screen)
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Residential Estimator has the following methods for computing the building's overall physical and functional depreciation:
Combined Physical & Functional Depreciation
Separate Physical & Functional Depreciation
None (No Overall Depreciation )
Each of these methods is described below. The building's physical and functional depreciation is applied to all components in Construction Systems that are included in Replacement Cost New, except those components that you depreciate individually.
With this option, Residential Estimator calculates the combined physical and functional depreciation percentage using the tables in the Residential Cost Handbook and Residential Cost Explorer. This calculation is based on the Occupancy, Construction Class, Quality, Effective Age and Typical Life. This calculation does not include either abnormal or excessive functional depreciation, or any external obsolescence, which you must add separately.
This is the combined percentage for normal physical and functional depreciation to be subtracted from the replacement cost new when computing the depreciated cost. This prints in the report as a single line, “Physical and Functional Depreciation.”
Example: If you enter 12.5% for combined physical and functional depreciation, the report includes the following:
Units Cost Total
Replacement Cost New 20,000 68.53 1,370,600
Less Depreciation
Physical & Functional 12.5% 171,325
Depreciated Cost 20,000 59.96 1,199,275
These fields set separate values for physical and functional depreciation, which are printed as separate lines in the report.
Example: If you enter 12% for physical depreciation and 7.5% for functional depreciation, the report includes the following:
Units Cost Total
Replacement Cost New 20,000 68.53 1,370,600
Less Depreciation
Physical 12.0% 164,472
Functional 7.5% 102,795
Depreciated Cost 20,000 55.17 1,103,333
Note: If you set separate Physical and Functional Depreciation percentages, the physical percentage is applied These fields set separate values for physical and functional depreciation, which are printed as separate lines in the report.
Select this method to set the combined Physical and Functional Depreciation Percentage using Age/Life of Straight Line depreciation. With this method, the percentage is calculated as the Effective Age divided by the Typical Life.
Example: If the Effective Age is 15 years and the Typical Life 60 years, the calculated depreciation percentage is 25%.
Select this method to set no combined Physical and Functional Depreciation Percentage for the overall building. You can still depreciate individual components if you select this method.
Enter the percentage the external depreciation only to be subtracted from the replacement cost new when computing depreciated costs.
Example: If you enter 12.5% for external depreciation, the report contains the following:
Units Cost Total
Replacement Cost New 20,000 68.53 1,370,600
Less Depreciation
External 12.5% 171,325
Depreciated Cost 20,000 59.96 1,199,275
The Effective Age of a residence is its age in years as compared with other residences performing like functions. It is the actual age less any years that have been taken off by face-lifting, structural reconstruction, removal of functional inadequacies, etc.
Use the following steps to determine the effective age of a residence:
Typical Life: Determine the residence's Typical Life, based on its type, exterior wall type and quality, using the "Typical Lives" table contained in Section E of the Residential Cost Handbook (and duplicated in the description of Typical Life below).
Remaining Useful Life: Estimate the building's remaining useful life, based on an evaluation its condition, construction quality, actual age and any renovations or repairs that have been made.
Effective Age: Subtract the remaining useful life from the Typical Life to obtain the Effective Age.
Example: For a good quality, single-family residence built 30 years ago with frame exterior walls, the following renovations and repairs have been completed:
The electrical system was replaced 10 years ago.
The heating plant was replaced 4 years ago.
The roof was repaired 8 years ago.
The interior was completely renovated 10 years ago, with new floor covering, wall finish and plumbing fixtures.
Based on the office building's current condition and a subjective evaluation of the effect of these changes, you estimate that the remaining useful life is now 45 years. The Typical Life for this residence is 55 years (see table in the description of Typical Life). Therefore, the effective age is:
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Typical Building Life |
55 years |
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Minus: Remaining Useful Life |
-45 years |
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Effective Age |
10 years |
The entry of Effective Age is optional, except if you select either of the following options for calculating Physical and Functional Depreciation:
Using Marshall & Swift Tables: With this option, Residential Estimator calculates the amount of normal physical and functional depreciation using the depreciation schedule in the Residential Cost Handbook, based on the occupancy, construction class and quality in addition to effective age.
Age/Life (Straight Line): With this option, Residential Estimator calculates the amount of physical and functional depreciation by dividing the Effective Age by the Typical Life.
The Typical Life of a building is its expected life, based on its type, style and quality. You can set Typical Life by selecting one of the following:
Marshall & Swift: Select this option to set the Typical Life from the table in Section E of the Residential Cost Handbook, which has the following Typical Lives:
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Single-Family Residences |
Low-Rise Multiples, Town Houses, Duplexes |
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Quality |
Frame |
Masonry |
Frame |
Masonry |
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Low |
45 |
50 |
-- |
-- |
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Fair |
50 |
55 |
45 |
50 |
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Average |
55 |
60 |
50 |
55 |
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Good |
55 |
60 |
50 |
55 |
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Very Good |
60 |
60 |
55 |
60 |
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Excellent |
60 |
65 |
55 |
60 |
Entered Value: Select this option to enter your own Typical Life.
Residential Estimator uses Typical Life to calculate the section’s combined physical and functional depreciation percentage if you use either of the following methods:
Marshall & Swift Tables: With this method, Residential Estimator uses the Typical Life, together with the Effective Age, to calculate the amount of normal physical and functional depreciation using the depreciation table in Section E of the Residential Cost Handbook.
Age/Life (Straight Line): With this method, Residential Estimator calculates the depreciation percentage as the Effective Age divided by the Typical Life.