What is the function of depreciation in property appraisals?

Depreciation plays a crucial role in property appraisals by helping to assess the current value of a property relative to its past worth. This process involves recognizing that properties can lose value over time due to various factors, including wear and tear, obsolescence, and market conditions. By incorporating depreciation into the appraisal process, appraisers can provide a more accurate and realistic market value that reflects the present condition of a property.

In contrast, inflating property values or ignoring depreciation would lead to misleading assessments that do not represent the true market realities. Additionally, while insurance coverage is an important aspect of property values, depreciation is broader and encompasses various economic factors affecting property worth, not solely related to insurance. Therefore, viewing depreciation as a tool to connect current valuations with historical worth offers a more comprehensive understanding of property's financial standing.