Property Valuation
A Nebraska home has 3 bedrooms and one bathroom. The appraiser notes most comparable 3-bedroom homes have 2 bathrooms. The one-bathroom home likely suffers from:
AExternal obsolescence
BPhysical deterioration
CFunctional obsolescence due to a deficiency✓ Correct
DSuperadequacy
Explanation
A functional deficiency occurs when a property lacks something the market demands (like a second bathroom for a 3-bedroom home). This is functional obsolescence — specifically a deficiency, not a superadequacy.
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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.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
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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