Property Valuation
What is 'functional obsolescence' in a Nevada real estate appraisal and provide a common example?
APhysical deterioration caused by weather and normal use
BLoss of value due to outmoded or inadequate features within the property itself, such as a 4-bedroom home with only one bathroom✓ Correct
CLoss of value due to external factors like nearby industrial development
DDepreciation caused by deferred maintenance on the roof or HVAC
Explanation
Functional obsolescence is a loss of value due to features within the property that are outdated, inadequate, or superadequate relative to current market standards. Classic examples include: too few bathrooms for the bedroom count, outdated floor plans, inadequate electrical capacity, unusual room configurations, or excessively large rooms (superadequacy).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.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Math Concepts
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