Property Valuation
In NH real estate, 'functional obsolescence' refers to a loss in value due to:
APhysical deterioration from age and use
BFactors outside the property, such as a nearby industrial facility
COutdated design, inadequate features, or superadequate features that reduce the property's utility or desirability✓ Correct
DChanges in the mortgage interest rate
Explanation
Functional obsolescence is value loss from within the property caused by outdated or inadequate features (e.g.
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- External (economic) obsolescence in real estate valuation is caused by:Property Valuation
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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.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
Math Concepts
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