External Obsolescence
A loss in property value caused by factors external to the property, such as a busy highway, industrial proximity, declining neighborhood, or unfavorable zoning changes. Also called economic or locational obsolescence.
External obsolescence is always incurable because the property owner cannot eliminate the external cause. It may be temporary (nearby construction) or permanent (adjacent highway). The appraiser estimates external obsolescence by analyzing paired sales — comparing properties affected by the external factor to similar properties that are not. External obsolescence can affect both land value and improvement value, and care must be taken not to double-count it. Common sources include environmental contamination, proximity to negative influences, economic decline, and legislative or regulatory changes.
Related Terms
Depreciation
A loss in value from any cause.
Functional Obsolescence
A loss in property value caused by deficiencies or superadequacies within the property itself, such as an outdated floor plan, insufficient electrical capacity, or an over-improvement relative to the neighborhood..
Physical Deterioration
A loss in property value resulting from wear and tear, damage, structural failure, or neglect of the physical improvements.
Cost Approach
A valuation method that estimates value by calculating the cost to reproduce or replace the improvements, subtracting accrued depreciation, and adding the land value.
Paired Sales Analysis
A technique used to estimate the value contribution of a specific property feature by comparing two sales that are identical except for that one feature.
More in Property Characteristics
View allGross Living Area (GLA)
GLAThe total finished, above-grade living area of a residential property, measured in square feet.
Gross Building Area (GBA)
GBAThe total area of a building measured from the exterior walls, including all finished and unfinished, above-grade and below-grade spaces.
Below-Grade Area
Any portion of a building that is below the ground level on any side.
ANSI Z765 Measurement Standards
ANSIThe American National Standards Institute standard for measuring residential floor area.