California Real Estate Broker ExaminationValuation and AppraisalMedium
An appraiser is valuing a property that has been negatively impacted by a recent zoning change that now restricts the land's potential uses, significantly reducing its development potential and thus its value. This loss in value is best described as a form of:
- AExternal Obsolescence
- BCurable Depreciation
- CPhysical Deterioration
- DFunctional Obsolescence
Show answer & explanationAnswer & explanation
Correct answer: A. External Obsolescence
External obsolescence (also known as economic obsolescence) is a loss in value due to factors outside the property boundaries, such as a negative zoning change, changes in traffic patterns, or proximity to undesirable land uses.
Why the other options are wrong
- B. Curable depreciation refers to loss that can be economically fixed, which isn't the primary classification here.
- C. Physical deterioration is wear and tear on the building itself.
- D. Functional obsolescence relates to outdated design or features within the property.
External Obsolescence
External obsolescence is a loss in property value caused by factors outside the property itself, such as changes in zoning, economic downturns, or proximity to undesirable environmental influences.
- Caused by external, outside-the-property factors.
- Generally considered incurable.
- Also known as economic obsolescence.
Memory trick: Functional is faulty design, External is outside decline.