In the observed condition method, what does an appraiser estimate?

In the observed condition method, an appraiser estimates the loss in value from depreciation. This approach focuses on the physical state of the property and evaluates how much value has been lost due to factors such as wear and tear, age, and functional obsolescence. By analyzing the current condition of the property, the appraiser can determine the extent of depreciation, which directly impacts the property's overall value. Understanding this loss is crucial for accurate property valuation, especially when considering the adjustments needed for current market trends and the property’s condition relative to similar properties.

The other options, while relevant in different appraisal methods, do not align specifically with what the observed condition method focuses on. Future income potential pertains to income-generating properties and is assessed through different valuation methods. Market demand relates to how property values are influenced by buyer interest and economic factors, not the immediate physical condition of the property itself. Replacement costs involve estimating how much it would cost to replace a property with a similar one, which is distinct from assessing depreciation based on the observed condition.