Property ValuationIntermediateAlaska Exam

Functional obsolescence in a property is caused by:

APhysical deterioration of structural components

BNegative factors located outside the property

COutmoded or inadequate features within the property itselfCorrect

DChanges in zoning regulations affecting the neighborhood, in general

Why Outmoded or inadequate features within the property itself Is Correct

Answer C: Outmoded or inadequate features within the property itself

Functional obsolescence is a loss in value due to features within the property that are outdated, inadequate, or over-improved relative to current market standards — such as an outdated kitchen, inefficient floor plan, or a three-car garage in a one-car neighborhood.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.