Obsolescence

Definition: Loss in a property's value or usefulness because its features are outdated or because outside conditions have changed. Appraisal distinguishes functional obsolescence from external obsolescence.

Example

An awkward floor plan reduces a home's appeal even though its materials remain in good physical condition.

Keep the distinction clear

Obsolescence differs from physical deterioration. A feature can function as built yet no longer match market needs; some deficiencies are economically curable and others are not.

Functional obsolescence

A loss in value caused by a deficiency or excess within the property, such as an outdated layout, inadequate bathroom access, or an overimprovement that the market does not fully value. It may be curable or incurable depending on whether correction is economically justified.

External obsolescence

A loss in value caused by influences outside the property, such as nearby noise, an incompatible neighboring use, or an adverse economic change. It is also called economic obsolescence and is generally considered incurable by the property owner.

For an exam question, identify the source of the loss: wear and tear is physical deterioration; a problem with the property’s design or features is functional obsolescence; an outside influence is external obsolescence.

Related terms

Depreciation · Curable Depreciation · Incurable Depreciation

Keep studying

CMA vs. Appraisal: What Is the Difference?

References: California DRE: real estate glossary

Pronunciation (US): ahb-suh-LES-uns (capitals show stress)

Pronunciation reference: Merriam-Webster