Property Valuation
External obsolescence in a Missouri property is caused by:
AWorn-out mechanical systems
BFactors outside the property such as a nearby industrial facility or declining neighborhood✓ Correct
CPoor floor plan design
DDeferred maintenance by the owner
Explanation
External (economic) obsolescence is caused by factors beyond the property's boundaries — such as nearby incompatible land uses, neighborhood decline, traffic changes, or economic conditions. It is typically incurable.
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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.
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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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