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October 17, 2011 (Regular Meeting) Page 745 calculating each aging period separately and summing the depreciation. Using an exterior wall type 17, (CB Stucco), we calculate the total depreciation as follows: FIRST 2 YEARS = 4.00 2 X 1.00 NEXT 22 YEARS = 22.00 22 X1.00 24 YEARS = 26% TOTAL DEPRECIATION The maximum normal depreciation normally allowed is 70% or a residual of 30% good. As we have not exceeded this figure, the 26% depreciation from normal physical deterioration is not over ridden. FOR RESIDENTIAL OR INCOME PROPERTIES WITH A MINIMUM OR EXCELLENT QUALITY FACTOR another table has been constructed which bases the amount of depreciation for a particular property on its useful life, meaning that age at which a property ceases to be functional. For example, IMPROVEMENT USE CODE 23 has a typical life expectancy of 25 years. Therefore when the building is 25 years old, it has been depreciated down to the lowest point of 30% condition or 70% depreciation. SCHEDULE FOR DETERMINING DEPRECIATION ON BUILDINGS WITH A 40 YEAR LIFE EXPECTANCY AS USED IN THE EXAMPLE ABOVE. 40 YEAR LIFE EXPECTANCY - DEPRECIATION SCHEDULE #6 EFFECT. AMOUNT PERCENT. * EFFECT. AMOUNT PERCENT. AGE OF DEPR. GOOD * AGE OF DEPR. GOOD 1 1 99 21 37 63 2 2 98 22 39 61 3 3 97 23 41 59 4 4 96 24 43 57 5 5 95 25 45 55 6 7 93 26 47 53 7 9 91 27 49 51 8 11 89 28 51 49 9 13 87 29 54 46 10 15 85 30 57 43 11 17 83 31 60 40 12 19 81 32 63 37 13 21 79 33 66 34 14 23 77 34 68 32 15 25 75 35 70 30 16 27 73 36 70 30 17 29 71 37 70 30 18 31 69 38 70 30 19 33 67 39 70 30 20 35 65 40 70 30 ECONOMIC OBSOLESCENCE - FUNCTIONAL OBSOLESCENCE ECONOMIC OBSOLESCENCE is determined through value loss due to conditions outside the property. FUNCTIONAL OBSOLESCENCE is determined through value loss within the property. Economic and functional obsolescence is depreciation added to the Normal Depreciation. Therefore if a building has 10% normal depreciation due to its age and you apply 10% Economic Obsolescence due to outside influence, the total depreciation would be 20 %. Chapter 8 INCOME PROPERTY VALUATION PREFACE It should be noted that this chapter is not designed to be a comprehensive text on income properties but only a summary and outline of the income approaches to value which can be applied through the PASCO Appraisal System. This capability enables mass property appraisers to apply techniques which heretofore proved too time consuming for mass appraisal. However, we would like to recommend further study with such text as that by Dr. William N. Kinnard, INCOME PROPERTY VALUATION, to familiarize the property appraiser with some of the more subtle but important points of income property appraising.