Which types of depreciation are identified in property assessment?

In property assessment, depreciation is classified primarily into three recognized categories: functional depreciation, physical depreciation, and economic depreciation.

Functional depreciation refers to a loss in value due to changes in technology or market demands that make a property less useful or desirable for its intended purpose. For instance, a property may experience functional obsolescence due to outdated layouts or features that don't meet current market standards.

Physical depreciation, on the other hand, is the loss of value resulting from the physical wear and tear of the property over time. This includes damage caused by environmental factors, neglect, or poor maintenance. The physical condition of a property directly impacts its overall valuation.

Economic depreciation encompasses external factors that can affect a property's value, such as changes in the economic environment, neighborhood conditions, or zoning laws. For instance, a downturn in the local economy could lead to decreased demand for real estate in that area, thus reducing property values.

Considering these definitions, it is clear that the correct choice identifies the three main types of depreciation used in property assessment correctly. Other options either introduce unrelated terminology or mislabel standard concepts in property appraisal.