Florida Real Estate Broker ExaminationValuation and Market AnalysisMedium
A real estate broker is performing a valuation for a client who owns a 15-year-old single-family home. The broker notes that the home's original single-pane windows are inefficient and contribute to higher energy bills, a feature that buyers in the current market actively avoid. Replacing them with modern, energy-efficient windows would be economically feasible. This situation is an example of:
- AFunctional obsolescence (curable)
- BEconomic obsolescence (curable)
- CPhysical deterioration (curable)
- DExternal obsolescence (incurable)
Show answer & explanationAnswer & explanation
Correct answer: A. Functional obsolescence (curable)
Outdated single-pane windows represent a design or feature flaw within the property that makes it less desirable or efficient compared to modern standards. Since replacing them is economically feasible, it is a curable form of functional obsolescence.
Why the other options are wrong
- B. Economic obsolescence is a type of external obsolescence, not related to an internal design flaw.
- C. Physical deterioration is wear and tear. While windows can deteriorate, the primary issue here is the inefficiency and outdated design, not just physical wear.
- D. External obsolescence originates outside the property and is typically incurable by the owner.
Curable Functional Obsolescence
A loss in value due to an outdated or inefficient feature within the property, where the cost to correct the issue is less than or equal to the value gained by making the correction.
- Originates from within the property (design, features).
- Economically feasible to repair or replace.
- Examples include outdated fixtures, inefficient layouts, or old windows where replacement adds more value than cost.
Memory trick: Depreciation: is it old, bad design, or bad neighborhood?