Which term best describes the recognition of value loss over time in an asset?

The term that accurately captures the recognition of value loss over time in an asset is "depreciation." Depreciation refers to the process of allocating the cost of tangible assets over their useful lives. As assets age, they typically lose value due to wear and tear, obsolescence, or market conditions. This loss in value is reflected in financial accounting to give an accurate picture of an asset's worth on the balance sheet.

In context, while the other options relate to various aspects of real estate or agency relationships, they do not pertain to the concept of value loss in assets. Demand refers to the desire for goods or services in economics, which does not directly address the reduction of value in assets. A deficiency judgment is a court order that means a borrower must pay the difference between the sale price of a property and the amount owed on the mortgage, not related to asset depreciation. Designated agency refers to a relationship in real estate where a broker represents two parties, which does not concern the asset's value over time. Thus, depreciation is the best term to describe the gradual loss in value of an asset.