Property Valuation
Functional obsolescence in real estate appraisal refers to:
APhysical deterioration caused by wear and tear
BLoss of value due to outdated design, layout, or features that no longer meet market standards✓ Correct
CValue loss caused by external factors such as proximity to a landfill
DDepreciation resulting from deferred maintenance
Explanation
Functional obsolescence is loss of value from within the property due to features that are outdated, inadequate, or in excess of what buyers currently want (e.g.
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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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
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