Property Valuation
What is 'functional utility' in real estate appraisal?
AThe ability of a building to function without utility services
BThe capacity of a property to serve its intended purpose and meet occupant needs effectively✓ Correct
CThe utility cost efficiency of a property's systems
DA measurement of how well a property's layout maximizes square footage
Explanation
Functional utility refers to a property's ability to serve its intended purpose and meet the needs and expectations of typical market participants. A property with high functional utility has a layout, design, and features that work well for its intended use. Functional utility is related to functional obsolescence—when a property loses functional utility due to outdated design, poor layout, or inadequate features, the resulting loss in value is functional obsolescence.
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