Property ManagementIntermediateDelaware Exam

What is 'economic obsolescence' as it applies to Delaware investment property management?

APhysical obsolescence caused by economic recession

BLoss in value from external factors like declining neighborhood, oversupply, or economic downturns that reduce demand or rentsCorrect

CSimply obsolescence caused only by outdated, old-fashioned property management practices at a given site, under standard practice

DEconomic loss from high tenant turnover

Why Loss in value from external factors like declining neighborhood, oversupply, or economic downturns that reduce demand or rents Is Correct

Answer B: Loss in value from external factors like declining neighborhood, oversupply, or economic downturns that reduce demand or rents

Economic (external) obsolescence is loss in property value caused by factors outside the property — such as neighborhood decline, economic downturns, oversupply in the rental market, or changes in employment in the area.

Exam Tip: Property Management

Property management questions cover landlord-tenant law, security deposits, and maintenance responsibilities. Know the differences between gross, net, and percentage leases.

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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.

Earnest Money

A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.

Contingency

A condition in a purchase contract that must be satisfied before the sale can proceed to closing.

Purchase Agreement

A legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.

Math Concepts

Profit & Loss

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