Massachusetts Real Estate License Practice Test 2025 – The All-in-One Guide to Master Your Exam!

Depreciation is the correct term used to describe a decrease in property value caused by factors such as physical deterioration or economic obsolescence. Physical deterioration refers to the wear and tear that a property experiences over time, which can result from inadequate maintenance, age, or environmental factors. Economic obsolescence, on the other hand, refers to a decline in property value due to external factors, such as changes in the neighborhood that might affect desirability, like increased crime rates or changes in zoning laws.

Understanding the concept of depreciation is fundamental in real estate, especially when evaluating properties for investment or appraisals. Depreciation reflects the loss of value, and recognizing it can help investors make informed decisions about the potential of a property. It is essential to differentiate this from appreciation—where property values increase—and other terms that do not specifically relate to a decline in property value.