California Real Estate Broker ExaminationValuation and AppraisalMedium
A lender requires an appraisal for a residential property. The appraiser finds that the property's physical condition is excellent for its age, but its architectural style is severely outdated and detracts significantly from its marketability. This obsolescence is best categorized as:
- AExternal Obsolescence
- BEconomic Obsolescence
- CPhysical Deterioration
- DFunctional Obsolescence
Show answer & explanationAnswer & explanation
Correct answer: D. Functional Obsolescence
Functional obsolescence refers to a loss in value due to inefficiencies or inadequacies within the property itself, such as an outdated architectural style or poor floor plan that makes it less desirable or useful by current standards.
Why the other options are wrong
- A. External obsolescence is a loss in value due to factors outside the property boundaries.
- B. Economic obsolescence is another term for external obsolescence, caused by external factors.
- C. Physical deterioration relates to wear and tear from age or use.
Functional Obsolescence
Functional obsolescence is a loss in property value due to an outdated design, inadequate features, or poor floor plan that no longer meets current market standards or buyer preferences.
- Caused by factors within the property.
- Relates to design, utility, or desirability.
- Can be curable or incurable.
Memory trick: Faded Function, Worn-out Physics, External Effects.