With which method of measuring depreciation must appraisers use comparable properties with and without defects?

The capitalized value method, often associated with the income approach, is focused on determining the present value of future income streams generated by a property. When using this method, appraisers must consider comparable properties, including those that have defects and those that do not. This comparison is essential because it allows appraisers to assess how the presence of defects affects the income potential or overall value of a property.

By analyzing properties with and without defects, appraisers can derive a more accurate capitalization rate or determine adjustments necessary to reflect the impacts of those defects on value. This thoughtful approach helps in understanding the true worth of an investment property by capturing variations in income potential due to physical or functional obsolescence.

The other methods listed do not require this comparable analysis in the same way. For instance, the replacement cost method primarily focuses on estimating the cost to replace a property's improvements, without the need to analyze income potential from similar properties. The cost approach evaluates property value based on the cost of land plus the cost of improvements minus depreciation, which doesn't emphasize comparables with defects in the same manner. The income approach, although it incorporates elements of capitalization, does not inherently require a focus on physical defects. Thus, the capitalized value method necessitates this comparative analysis to