Certified Pennsylvania Evaluator Practice Exam

Which method is NOT considered a direct method for measuring depreciation?

1. Economic age-life method

2. Sales comparison approach

3. Modified economic age-life method

4. Breakdown method

The correct answer is: Sales comparison approach

The sales comparison approach is not considered a direct method for measuring depreciation because it primarily relies on comparing the subject property to similar properties that have sold recently. This approach focuses on market data to derive value rather than directly measuring a property's depreciation. In contrast, the other methods mentioned—such as the economic age-life method, modified economic age-life method, and breakdown method—are structured to directly assess the wear and tear or functional obsolescence of the asset based on its age, usage, and condition. In the context of property appraisal, direct methods assess depreciation by looking at specific factors related to the asset itself, whereas the sales comparison approach derives conclusions based on external market activity. Thus, it reflects a market-driven perspective rather than a direct measurement of the property's condition or value decline.