What is Functional Obsolescence?

Before we dive into functional obsolescence, let's first understand what the word obsolescence means. Obsolescence is a type of depreciation resulting in a loss of value, even if that property is still in good condition.

In real estate, we use the term functional obsolescence to describe when either a fixture or an entire structure becomes so dated that it is no longer as useful or desirable as it once was. Essentially, functional obsolescence refers to the loss of property value due to one or many obsolete features. This means the property lost value due to conditions within the property itself, not because of local or macro-economic conditions.

An example of functional obsolescence in residential real estate would be a dated kitchen or bathroom that buyers deem undesirable. 

An example of functional obsolescence in commercial real estate could be a warehouse's poor layout or a dated office layout.

For your real estate exam, it’s most important to remember that functional obsolescence causes a depreciation of value in a property due to outdated features.  

If you want to see some examples of questions that will be on the actual real estate exam, check out our free real estate practice exam. We have been named as the best real estate exam practice for 10 years in a row!

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