Valuation and Analysis, 14% of the examination

Functional obsolescence

Loss in value from a defect inside the property boundary, such as an outdated floor plan.

Functional obsolescence is curable when the cost to fix is less than the value it adds, and incurable when it is not. External obsolescence comes from outside the boundary, such as a new freeway, and is always incurable because the owner cannot change it. Physical deterioration is wear and tear. The inside-or-outside test resolves nearly every depreciation classification question.

See it in a question

One question from Valuation and Analysis, so the term lands in the context the exam uses it in.

Valuation and Analysis · 14%Methods of Estimating Value

An appraiser values a 40-year-old single-family home in an established neighbourhood with many recent sales. Which approach carries the most weight?

Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanour under B&P Code section 123.

Where this is tested

Property Valuation and Financial AnalysisThree short sub-topics carrying fourteen percent, and most of the arithmetic on the exam. The three approaches to value, and the income analysis that turns a rent roll into a number.14%Practise Valuation and Analysis28 questions on this area, every option explained.Practice

Functional obsolescence

See also

See it in a question

Where this is tested

Other terms in this area