What is an example of functional obsolescence in real estate?

The application of the term varies based on industry. For example, in real estate, it refers to the loss of property value due to an obsolete feature, such as an old house with one bathroom in a neighborhood filled with new homes that have at least three bathrooms.

Which of the following is an example of functional obsolescence?

For example, an old, two-bedroom house in an area with modern three bedrooms with a bathroom in each room can be considered functionally obsolete. Other items that are highly prone to functional obsolescence include electronics, such as smartphones.

What causes functional obsolescence?

Functional obsolescence occurs when an asset becomes less useful or desirable due to an outdated design that can't easily be updated or changed. (Tweet this!) In recent decades, functional obsolescence is most often the result of new technology; a good example is VHS videotape.

What is functional or physical obsolescence?

Functional obsolescence occurs when a property loses value due to its architectural design, building style, size, outdated amenities, local economic conditions and changing technology.

Which of the following is an example of curable functional obsolescence?

Curable or Incurable

If it does it is considered curable. An example of curable functional obsolescence would be if renovating a kitchen would result in an increase in the overall value of the house greater than the cost to renovate the kitchen. Most curable functional obsolescence are deficiencies.

Functional Obsolescence - Real Estate exam

What are the types of obsolescence in real estate?

What is external obsolescence in real estate?

External Obsolescence is a form of depreciation caused by factors not on the property itself, such as environmental, social, or economic forces. An example would be a very nearby garbage dump. The homeowner cannot reverse this loss in value by spending money to fix something.

What is the difference between functional obsolescence and economic obsolescence?

Unlike functional obsolescence, which occurs within a property, economic obsolescence occurs outside the property and is beyond the control of the property owner. This means that the property is incurable because it would be too expensive to cure the problem.

What is internal obsolescence in real estate?

What Is Functional Obsolescence in Real Estate? Functional obsolescence in real estate describes a property that has decreased in desirability or functionality due to an outdated design feature, physical deterioration, or undesirable external factors.

Is deferred maintenance functional obsolescence?

While physical deterioration from deferred maintenance is fixable, it's also considered a form of functional obsolescence.

What are the four types of obsolescence?

What is economic obsolescence in real estate?

Economic obsolescence (EO) is the loss of value resulting from external economic factors to an asset or group of assets.

What is meant by functional obsolescence could a new building suffer from functional obsolescence?

Typically, functional obsolescence is associated with a building's decline in utility through the passage of time, but it is possible for a newer building to suffer from functional obsolescence. For example, costumer preferences and demands may change soon after a relatively new building is completed.

What is incurable depreciation in real estate?

incurable depreciation or obsolescence. a defect that cannot be cured or that is not financially practical to cure; a defect in the “bone structure” of a building. Compare curable depreciation. Example: It is estimated that if a specific house had a more convenient floor plan, it would sell for an additional $5,000.

What is incurable external obsolescence?

A loss of value (typically incurable) resulting from extraneous factors that exist outside of the property itself; a type of depreciation caused by environmental, social, or economic forces over which an owner has little or no control.

What type of obsolescence would prevent an investor from using a property in the most modern up to date way?

Functional Obsolescence is the impairment of a real property's functional capacity due to changes in market tastes and/or standards. In other words, a property could become functionally obsolete when its design, style, amenities, or technology no longer meet the needs and/or expectations of modern tenants.

Which home suffers from external obsolescence?

Which would be considered external obsolescence? a home fronting on a busy four-lane highway. it is when something outside the control of the property.

What is a physical obsolete?

Physical obsolescence is the loss of property value due to wear and tear. It is usually caused by gross mismanagement on the path of the owner. Physical obsolescence is inevitable in that all properties will suffer from wear and tear.

Is a Pool A functional obsolescence?

If a house has a swimming pool that is smaller in size compared to those found in the other homes in the neighborhood, this deficiency or decline in usefulness can contribute to the property becoming functionally obsolete.

Which type of cost estimate eliminates functional obsolescence?

-The use of the replacement cost concept presumably eliminates most forms of functional obsolescence. Therefore, the only depreciation to be measured is physical deterioration and external obsolescence. You just studied 16 terms!

Can a brand new structure exhibit functional obsolescence?

As a building gets older, it is more likely to exhibit functional obsolescence. This could be evident in an older kitchen or bath that no longer meets market expectations or tastes. However, it is possible for a brand-new structure to have built-in functional obsolescence.

Which of the following is an example of locational obsolescence?

For example, opening a landfill in the neighborhood may result in a decline in the value of properties in the neighborhood, and the property owners may not be able to control the changes.

What are some examples of planned obsolescence?

What is obsolescence in buildings?

Obsolescence is a decline or loss of utility of an object, building or product. Different types of building obsolescence decrease buildings' utility and shorten their service life.

What are the three types of depreciation in real estate?

Adverse physical, functional, and locational influences cause property improvements to depreciate. There are three types of depreciation: physical deterioration, functional obsolescence, and external obsolescence.