Curable & Incurable Physical Deterioration in the Cost Approach

Step 3 of the cost approach to valuation is to estimate the structure's accumulated depreciation.  There are five forms of depreciation and value adjustments that should be considered.  Two of these adjustments involve the calculation of curable and incurable physical deterioration of a structure.

 

Curable Physical Deterioration: Estimating the value to assign this component simply involves taking inventory of what needs repaired, such as weather stripping, painting, window replacement, etc., and assigning it a market cost to remedy.  This should only include items if the gain in value resulting from the repair will offset the cost of repair.

 

 

 

Incurable Physical Deterioration: The loss resulting from wear and tear for which the cost of repair would outweigh the increase in value from repair.  This includes ALL physical deterioration not included in the "curable" category.  Incurable physical deterioration is categorized into short-term and long-term.  Shoert term includes items with an expected life shorter than that of the building.  Long-term includes those items that have an expected life equal to or longer than the expected remaining life of the building.