Property ValuationIntermediateDelaware Exam
A Delaware home has an outdated, closed floor plan in a market where open floor plans are preferred. This is an example of:
APhysical deterioration
BExternal obsolescence
CFunctional obsolescenceCorrect
DEconomic depreciation
Why Functional obsolescence Is Correct
Answer C: Functional obsolescence
Functional obsolescence results from outdated design, layout, or equipment that no longer meets current market preferences. An outdated floor plan is a classic example of functional obsolescence.
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.
Key Property Valuation Terms in This Question
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