Property Valuation
External obsolescence affecting a Missouri farm adjacent to a new industrial park is an example of:
ACurable physical deterioration
BFunctional obsolescence
CEconomic (external) obsolescence✓ Correct
DDeferred maintenance
Explanation
Economic or external obsolescence is caused by factors outside the property itself, such as nearby incompatible land uses, traffic, or economic decline. It is always incurable by the property owner.
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Key Terms to Know
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
DepreciationA 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.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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