What does the term "functional obsolescence" refer to?

The term "functional obsolescence" specifically refers to a loss in property value that occurs when a property has outdated features or designs that are no longer considered desirable or useful in the current market. This can include a variety of factors, such as inadequate kitchen layouts, lack of modern amenities, or floor plans that do not meet the preferences of today's buyers.

Functional obsolescence can also arise from changes in technology or consumer preferences, leading to a situation where the property no longer meets the needs or expectations of potential occupants. This form of depreciation is intrinsic to the property itself, distinguishing it from other forms of obsolescence that may be influenced by external or environmental factors.

Understanding functional obsolescence is crucial for appraisers as they assess property values and marketability, ensuring they take into account how design and usability can impact a property's worth.