A property is said to have functional utility when:
Correct Answer
D) Its design serves the purposes the market expects
Why this is correct: Functional utility is the measure of how well a property's design and layout serve the needs and expectations of the market for that property type. A property has functional utility if it is fit for its intended purpose as defined by current market standards. Why the other choices are wrong: 'Its land value exceeds the value of its improvements' describes a property ripe for redevelopment. 'It has been recently constructed' does not guarantee functional utility; a new building can have a poor layout. 'It exceeds neighborhood standards for finish' describes quality, not functional design. Exam tip: Utility is about usefulness. A 1950s kitchen may work, but if the market expects an open-concept layout, it has functional obsolescence.
Why This Is the Correct Answer
Why this is correct: Functional utility is the measure of how well a property's design and layout serve the needs and expectations of the market for that property type. A property has functional utility if it is fit for its intended purpose as defined by current market standards. Why the other choices are wrong: 'Its land value exceeds the value of its improvements' describes a property ripe for redevelopment. 'It has been recently constructed' does not guarantee functional utility; a new building can have a poor layout. 'It exceeds neighborhood standards for finish' describes quality, not functional design. Exam tip: Utility is about usefulness. A 1950s kitchen may work, but if the market expects an open-concept layout, it has functional obsolescence.
More real-estate-market Questions
A market-conditions adjustment should be applied to a comparable:
Building permit data is most useful to an appraiser as:
In the neighborhood life cycle, what characterizes the decline stage?
'Filtering' describes the process by which:
Under the principle of substitution, the maximum value of a property tends to be set by:
Why does an appraiser analyze the market area before analyzing the subject property?
In which phase of the real estate cycle do rising vacancies first meet a still-growing construction pipeline?
Which measure most directly signals demand strength in a housing market?
The principle of consistent use prohibits:
Frictional vacancy in a rental market refers to:
People Also Study
Valuation Principles & Procedures
25% of exam
Property Description & Analysis
20% of exam
Market Analysis & Highest/Best Use
15% of exam
Appraisal Math & Statistics
15% of exam
USPAP (Ethics & Standards)
15% of exam