Property Valuation
External obsolescence affecting an Arizona property's value might be caused by:
AA worn-out roof on the subject property
BAn outdated floor plan that buyers do not prefer
CA new highway built adjacent to a residential neighborhood✓ Correct
DDeferred maintenance on the property
Explanation
External (economic) obsolescence results from factors outside the property boundaries — such as a nearby highway, industrial facility, or neighborhood decline — that negatively impact value. It is generally incurable by the property owner.
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Key Terms to Know
Depreciation
A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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