What does functional obsolescence refer to in real estate appraisal?

Functional obsolescence in real estate appraisal refers to a loss in value due to outdated building conditions or features that are no longer considered desirable or effective. This type of obsolescence occurs when a property has become less functional compared to current market demands or standards. For example, a home with poor design layouts, inadequate square footage for modern living, or outdated roofing might have reduced appeal or usability, leading to a decrease in its overall market value.

This concept highlights the importance of adapting properties to meet the changing expectations of buyers. Features that were once popular might lose their appeal, making it essential for sellers to ensure their properties are up-to-date in terms of design and functionality. Recognizing functional obsolescence allows appraisers to assess a property's true market value accurately by considering how current standards impact its desirability.