Property Valuation
External (economic) obsolescence is a form of depreciation caused by:
AOutdated plumbing fixtures inside the home
BPhysical wear from normal use over time
CNegative factors outside the property boundaries, such as a new highway or industrial facility nearby✓ Correct
DA poor floor plan that reduces the home's functionality
Explanation
External obsolescence arises from factors outside the property — such as nearby noise, pollution, a change in neighborhood character, or adverse zoning changes — and is generally 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.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
ZoningLocal government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Math Concepts
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