A four-bedroom house offers only one full bathroom upstairs and none on the main level. The deficiency is best confirmed as obsolescence by:
Correct Answer
B) Market evidence that buyers discount such layouts
Why this is correct: Obsolescence is a market-derived conclusion. Evidence such as paired sales showing price differences, longer marketing times, or buyer/agent feedback confirms that the design flaw results in a measurable value loss. Why the other choices are wrong: "The floor plan's age alone" does not prove obsolescence; older designs can still be functional. "The current owner's stated opinion of the daily inconvenience" is subjective, not market evidence. "Any deviation from new-home plans" is not inherently a deficiency; the market must confirm a value impact. Exam tip: Obsolescence must be supported by market data, not just personal opinion or age.
Why This Is the Correct Answer
Functional obsolescence exists only where the market discounts the deficiency, so evidence that buyers pay less for such layouts is what confirms it.
Why the Other Options Are Wrong
Option A: The floor plan's age alone
Age alone does not establish obsolescence. Many older layouts remain fully acceptable to buyers.
Option C: The current owner's stated opinion of the daily inconvenience
The owner's experience of inconvenience is personal rather than a market reaction, which is what appraisals measure.
Option D: Any deviation from new-home plans
Deviation from new construction would classify nearly all existing housing as obsolete, which is neither useful nor accurate.
The Market Decides What Is Obsolete
The Market Decides What Is Obsolete. Your opinion of the floor plan is not evidence.
How to use: Find paired sales matching the deficient layout against a better one. The difference is the obsolescence.
Exam Tip
After measuring, classify it. Curable means the cost to cure is recovered in value; incurable means it is not.
Common Mistakes to Avoid
- -Inferring obsolescence from age or layout alone
- -Relying on the owner's or appraiser's personal judgment
- -Skipping the curable versus incurable classification
Concept Deep Dive
Analysis
Functional obsolescence is a market concept, not an aesthetic or a personal one. A four-bedroom house with a single upstairs bathroom and none on the main level may be poorly configured by contemporary standards, but that only becomes obsolescence if buyers actually pay less for it — and the way to establish that is market evidence, typically paired sales matching such houses against otherwise similar ones with better bathroom arrangements. The distractors each substitute a poor proxy. Age alone proves nothing, since many older layouts remain fully acceptable to buyers. The owner's opinion of the inconvenience is a personal experience, not a market reaction, and appraisals measure the latter. And deviation from new-home plans would classify almost every existing house as obsolete, which is neither useful nor true. Once measured, the deficiency is classified as curable or incurable depending on whether the cost to add a bathroom is recovered in value.
Background Knowledge
Functional obsolescence is a loss in value from a deficiency or superadequacy within the property, measured by market reaction. It is classified as curable where the cost to cure is recovered in value and incurable where it is not.
Real-World Application
An appraiser supports a functional obsolescence deduction with three paired sales showing four-bedroom one-bath houses selling below comparable two-bath properties.
More Cost Approach Questions
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A warehouse cost $210,000 to build when the cost index stood at 105. The index is now 210. Its indicated current cost is:
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Market extraction of depreciation is limited by the fact that it:
Functional obsolescence caused by a deficiency is measured as curable when:
Curable physical deterioration is measured at cost to cure because:
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A five-bedroom house has only one bathroom. Adding a second costs $28,000 now, would have cost $17,000 during construction, and the market pays $31,000 for the second bath. The functional obsolescence is: