A house with 4,200 square feet in a neighborhood of 1,800-square-foot homes suffers from:
Correct Answer
B) Superadequacy — the market will not pay for the excess
Why this is correct: Superadequacy is a type of functional obsolescence where an improvement is overly large, costly, or elaborate for its neighborhood, and the market does not pay for the excess cost. Here, a 4,200 sq ft house is an over-improvement compared to the 1,800 sq ft norm, so its value suffers. Why the other choices are wrong: 'Physical deterioration' refers to wear and tear, not size mismatch. 'External obsolescence' is caused by factors outside the property boundaries, not by the subject property itself. 'No obsolescence' is incorrect because the market typically penalizes such over-improvement. Exam tip: Superadequacy = an excess feature that costs more than it adds in value. Think 'too much for the neighborhood.'
Why This Is the Correct Answer
Option B is right because the excess size is an over-improvement for its neighborhood and the market will not pay for the extra construction. Buyers shopping a market of eighteen-hundred-foot homes are not, as a group, prepared to pay full cost for more than twice that area, so a portion of the money in the ground is unrecoverable. That gap is functional obsolescence in the form of a superadequacy, not a defect in workmanship or a problem outside the lot lines. It is also generally incurable, since removing finished area is rarely economic.
Why the Other Options Are Wrong
Option A: Physical deterioration from the larger structure
Physical deterioration is wear, decay, and the effects of the elements on materials, and size has nothing to do with it. A larger house can be in flawless condition and still suffer this loss, which is the signal that the category is wrong. Square footage is an adequacy question, not a condition question.
Option C: External obsolescence caused by the neighbors
External obsolescence originates outside the property boundaries, and the neighbors here have done nothing to the subject - they simply built smaller houses, which is the market standard against which the subject is measured. If the surrounding pattern counted as external, every functional item would be reclassified, since market standards are always set by what is outside the property. The over-improvement lives inside the lot lines and is therefore functional.
Option D: No obsolescence, since larger homes always sell higher
Larger homes usually do sell for more in absolute terms, and the subject here would very likely be the priciest house on the street - but selling higher is not the same as returning cost. The question is whether each additional dollar of construction returns a dollar of value, and beyond the neighborhood's norm it does not. Confusing a higher sale price with full cost recovery is the core error this option targets.
Too little is a deficiency, too much is a superadequacy
Functional obsolescence runs in both directions. Too little of what the market wants is a deficiency. Too much of what the market will not pay for is a superadequacy. Both are inside the lot lines, both are functional, and both cost the owner money.
How to use: When a stem compares the subject to its neighborhood, decide which side of the norm it falls on and name the matching form. Then reject physical, which needs a condition word, and external, which needs a cause beyond the boundaries.
Exam Tip
Superadequacy questions often hide behind words like custom, elaborate, luxury, or oversized; treat any of them appearing alongside a modest neighborhood as the trigger.
Common Mistakes to Avoid
- -Classifying an over-improvement as external obsolescence caused by the neighbors
- -Assuming a higher sale price means full cost recovery
- -Measuring a superadequacy by the whole cost of the component rather than the excess
- -Overlooking added operating cost that an over-improvement generates
Concept Deep Dive
Analysis
This question tests superadequacy, the second form of functional obsolescence and the mirror image of a deficiency. A deficiency is something the market expects that the property lacks; a superadequacy is something the property has that exceeds what the market will pay for. Both are functional because both concern the improvements measured against market standards, and both cause a loss in value. The underlying idea is the principle of conformity - value is maximized where a property is reasonably similar to those around it - together with the principles of progression and regression, under which a large or elaborate property surrounded by smaller ones tends to be pulled down in value while a modest one among larger neighbors is pulled up. A forty-two-hundred-foot house among eighteen-hundred-foot houses has cost new that the market in that neighborhood will not fully return, and the unrecovered portion is the superadequacy. Note the measurement quirk: a superadequacy is generally measured by the excess cost new of the offending component, less any depreciation already charged against it, plus any added operating cost the excess creates.
Background Knowledge
You need superadequacy as a form of functional obsolescence, its measurement by excess cost new less depreciation already charged plus any added operating cost, and the principles of conformity, progression, and regression that explain why over-improvement is penalized. You should also know the highest and best use framework, since an over-improvement often signals that the existing improvements are not the ideal improvement for the site.
Real-World Application
An owner who built a forty-two-hundred-foot custom home in a subdivision of eighteen-hundred-foot ranches finds appraisers concluding well below cost. The cost approach shows the shortfall directly as a superadequacy, and the sales comparison approach confirms it, since no sale in the neighborhood approaches the cost figure.
More Cost Approach Questions
In a cost approach for a proposed building, the appropriate cost basis is generally:
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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Curable physical deterioration is measured at cost to cure because:
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