Texas Real Estate Sales Agent ExamValuation and Market AnalysisEasy
Which of the following would be considered an example of external obsolescence affecting a property's value?
- AA cracked foundation requiring significant structural repair.
- BA busy highway constructed next to a residential property.
- CAn outdated kitchen with original 1970s appliances.
- DA leaky roof that needs replacement.
Show answer & explanationAnswer & explanation
Correct answer: B. A busy highway constructed next to a residential property.
External obsolescence is a loss in value due to factors outside the property boundaries, often incurable. A newly constructed busy highway next to a residential property would negatively impact its value due to noise, traffic, and decreased desirability, fitting the definition of external obsolescence.
Why the other options are wrong
- A. A cracked foundation is physical deterioration, a structural issue within the property.
- C. An outdated kitchen is functional obsolescence, as it's within the property but no longer desirable or efficient.
- D. A leaky roof is physical deterioration, a form of depreciation.
External Obsolescence
A form of depreciation caused by negative factors outside the subject property, often incurable, such as a decline in neighborhood desirability or economic changes.
- Caused by factors outside the property.
- Typically incurable by the owner.
- Examples: undesirable external influences, economic downturn.
Memory trick: Depreciation: 'P'hysical wear, 'F'unctional issues, 'E'xternal problems.