How is functional obsolescence defined in appraisal counseling?

Functional obsolescence refers specifically to a decrease in property value that occurs when a property has outdated features or a design that no longer aligns with current market standards. This condition can arise from a variety of factors, including technological advancements that render certain features obsolete or changes in consumer preferences that make particular design elements less desirable. For example, a home with a floor plan that does not accommodate modern living preferences—such as open concept spaces—or outdated bathroom and kitchen designs might experience a decline in value due to functional obsolescence.

This concept is distinct from other types of obsolescence. External factors affecting property value, like economic downturns or changes in the neighborhood, are better classified under external obsolescence. Seasonal fluctuations in property values typically pertain to market cycles and do not relate to the intrinsic features of the property itself. Permanent reductions in neighborhood amenities would also reflect external influences rather than the internal design issues that characterize functional obsolescence. Thus, the definition that emphasizes the impact of outdated features and poor design effectively captures the essence of functional obsolescence in the context of appraisal counseling.