Property Valuation
What is 'functional obsolescence' in real estate appraisal?
AA. Physical deterioration due to age and wear
BB. Loss in value due to outmoded design, outdated equipment, or poor layout that impairs utility✓ Correct
CC. Loss in value due to external factors outside the property
DD. Depreciation caused by environmental hazards
Explanation
Functional obsolescence is a loss in value due to poor design, outdated features, or inadequate equipment within the property. Examples include outdated floor plans, too few bathrooms for the size of the home, or obsolete electrical systems. Unlike physical deterioration, it's a design or utility problem.
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