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A loss in property value caused by deficiencies or superadequacies within the property itself, such as an outdated floor plan, insufficient electrical capacity, or an over-improvement relative to the neighborhood.
Functional obsolescence can be curable (when the cost to cure is less than or equal to the value increase from the cure) or incurable (when fixing it costs more than the value it would add). Examples of curable functional obsolescence include outdated kitchen or bathroom that can be renovated for less than the value increase. Incurable functional obsolescence includes structural issues like low ceilings, poor floor plan layout, or superadequacies such as a $100,000 pool in a neighborhood where pools add only $10,000 to value. It is one of the three forms of depreciation in the cost approach.
Related Terms
Depreciation
A loss in value from any cause.
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.
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.
Superadequacy
An improvement or feature that exceeds what the market demands for the property type and location, resulting in a cost that is not fully recoverable in the sale price.
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.