What is "functional obsolescence" and how does it affect appraisals?

Functional obsolescence refers to a reduction in a property's value resulting from outdated features or design that no longer meet current market preferences or standards. This concept is important in appraisals because it directly affects how the property's value is assessed. For example, a home with a poorly designed layout or outdated kitchen and bathroom fixtures may be perceived as less desirable in the current market, leading to a lower appraisal value.

Understanding functional obsolescence allows appraisers to make informed assessments that reflect the current demand and functionality of a property. If a property has characteristics that are no longer considered functional or appealing to buyers, the appraised value will typically reflect this decrease in desirability and functionality.

In contrast to alternatives presented, which may either suggest an increase in value or limit the application of functional obsolescence, the correct definition encompasses its broader implications and relevance across various property types.