How is the concept of depreciation important in property appraisals?

The concept of depreciation holds significant importance in property appraisals, particularly in helping appraisers assess the effective age of a property. Depreciation reflects the decline in a property's value due to various factors, such as physical wear and tear, functional obsolescence, or external economic influences. By understanding and calculating depreciation, appraisers can estimate the effective age of a property, which may differ from its actual chronological age. The effective age represents the perceived age of a property based on its condition and upgrades, rather than just the number of years since it was built.

This assessment is crucial because it informs appraisers about how much value a property has lost over time, guiding their evaluation of the current market value. In contrast, other choices presented in the question either misrepresent the role of depreciation or restrict its relevance unduly. For instance, depreciation does affect property tax assessments, but it is the effective age that directly informs appraisals, making the latter the more pertinent focus in this context.