Deed - Civic Center - File 155, 1938 pt1

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-10- for the estimated cost of remodeling the struc- ture, curing as many functionally obsolete items as economically possible. These sums are esti- mated after a careful analysis of the deficiencies and are subtracted from total property value indicated by the income approach. The various items of depreciation estimated in this manner are checked against the appraiser's estimated depreciation under the cost approach. The cost approach to property value is arrived at by estimating replacement cost and then de- ducting all forms of depreciation, in this case from observation; the land value estimate is added from comparable sales. Land valuation in this case is based upon the same premise of highest and best use applied in the income ap- proach. Functional and economic obsolescence are of major importance. It may be well to discuss at this point these elements of depreciation. As mentioned above, depreciation is considered by the appraiser to be a major factor in this valuation. The Ap- praisal Terminology Handbook, published by the American Institute of Real Estate Appraisers, defines depreciation as "A loss in capital value. An effect caused by deterioration or obsolescence or both." Deteriortation is evidenced by wear and tear, decay, dry rot, encrustation or struc- tural defects. This is not a material problem in the subject property. Obsolescence is devi- sable into two parts, functional and economic. Functional obsolescence may be due to a poor floor plan, functional inadequacy or overade- quacy due to size, style, age, or otherwise. It is evidenced by conditions within the property itself. Were the highest and best use or great- est monetary return to the property for a muni- cipal courthouse, functional inadequacy or over - adequacy would probably be of minor significance. However, for its most acceptable use there is an extreme deficiency in the floor plan. Economic obsolescence is caused by changes ex- ternal to the property such as inharmonious pro-