Property Valuation
Functional obsolescence caused by an outdated floor plan in a Missouri home is an example of:
ACurable physical deterioration
BIncurable functional obsolescence✓ Correct
CExternal obsolescence
DEconomic obsolescence
Explanation
An outdated floor plan is functional obsolescence (loss in value due to poor design). If the cost to remedy exceeds the value added, it is 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.
Math Concepts
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