Florida Real Estate Sales Associate Examination Content OutlineReal Estate Valuation and Market AnalysisEasy
A property is located next to a newly constructed municipal waste treatment plant, which has significantly reduced the desirability and market value of the surrounding homes. This loss in value is best described as:
- APhysical deterioration
- BCurable obsolescence
- CExternal obsolescence
- DFunctional obsolescence
Show answer & explanationAnswer & explanation
Correct answer: C. External obsolescence
External obsolescence (also known as economic obsolescence) is a loss in value due to factors outside the subject property itself. A nearby waste treatment plant is a classic example, as it negatively impacts the property's value but cannot be remedied by improvements to the property.
Why the other options are wrong
- A. Physical deterioration is wear and tear on the property itself.
- B. While some obsolescence is curable, external obsolescence is almost always incurable by the property owner.
- D. Functional obsolescence is due to outdated design or features within the property.
External Obsolescence
A loss in property value caused by factors external to the property itself, often stemming from economic, environmental, or locational issues.
- Always considered incurable by the property owner.
- Examples include proximity to undesirable land uses, economic downturns, or changes in zoning.
- Affects the property's desirability and marketability.
Memory trick: Is the problem INSIDE the house or OUTSIDE? That tells you the obsolescence type!