What does physical depreciation in real estate appraisal refer to?

Physical depreciation in real estate appraisal refers to the loss in property value due to physical deterioration. This happens when a property experiences wear and tear over time, which can be caused by various factors such as age, climate, neglect, or damage from environmental events. As physical deterioration occurs, the overall condition of the property declines, leading to a decrease in its market value.

Understanding physical depreciation is crucial for real estate appraisers as they assess the property's current value compared to its potential value if it were in better condition. This aspect of property assessment helps in determining fair market value, making it a significant factor in real estate transactions and investment decisions. The other options highlight scenarios that do not directly address the concept of physical depreciation, which specifically focuses on the negative impact of deterioration on a property's value.