Externalities in appraisal refer to:

Correct Answer

D) Off-site influences that affect a property's value

Why this is correct: Externalities are economic forces originating outside the property that positively or negatively impact its value without the owner's action. Examples include a new highway (negative) or a community park (positive). In appraisal, negative externalities can lead to external obsolescence in the cost approach. Why the other choices are wrong: "Legal restrictions recorded against the title" describes encumbrances or easements, not externalities. "Costs incurred outside the appraisal's fee budget" refers to project expenses, not value influences. "Physical features located outside the building" describes site improvements, not off-site economic forces. Exam tip: Think 'outside forces'—externalities are off-site economic influences on value.