Which condition is expressly a functional utility loss?
Correct Answer
D) Verified buyer discount for inadequate bathroom capacity in an undamaged house.
A supported market discount for insufficient bathroom capacity in an undamaged house is functional obsolescence: a loss caused by the design of the property itself. Wear in otherwise adequate floor finishes is physical deterioration, a price loss from nearby industrial odor is an external influence, and chronological age alone with no observed loss in value or utility is not a functional utility loss.
Why This Is the Correct Answer
Option D is correct because a verified buyer discount for inadequate bathroom capacity in an undamaged house is a loss caused by the property's own design. An insufficient number of bathrooms is a recognized example of poor residential design. The house is undamaged, so the loss is not physical, and nothing points to an outside cause.
Why the Other Options Are Wrong
Option A: Verified wear in otherwise adequate floor finishes.
Option A describes verified wear in otherwise adequate floor finishes. Wear of materials is physical deterioration, not a functional utility loss, especially when the finishes are otherwise adequate in design.
Option B: Verified price loss from nearby industrial odor.
Option B describes a verified price loss from nearby industrial odor. That loss originates outside the property, so it is external obsolescence rather than a functional utility loss.
Option C: Chronological age alone, with no observed loss in market value or utility of the house.
Option C describes chronological age alone, with no observed loss in market value or utility. Age by itself is not a loss in utility, so it does not show functional obsolescence.
Inside design, inside loss
If the problem lives in the floor plan or the fixtures count and the house is undamaged, it is functional. Worn surfaces are physical, and smells or noise from next door are external.
How to use: Use this check to sort each answer choice by the source of the loss before picking the functional one.
Exam Tip
Eliminate choices that describe wear or off-site influences first; a choice describing a design shortfall with market support is the functional loss.
Common Mistakes to Avoid
- -Treating worn finishes as functional obsolescence
- -Classifying an off-site nuisance as a functional loss
- -Assuming chronological age alone proves a utility loss
Concept Deep Dive
Analysis
This question tests recognition of functional obsolescence among several possible causes of loss. Functional obsolescence is a loss caused by the design of the property itself, such as an insufficient number of bathrooms. The candidate must separate design deficiencies from wear, outside influences and mere age.
Background Knowledge
Functional obsolescence results from deficiencies or superadequacies in the property's design, layout or equipment relative to market standards. Examples of poor residential design include inadequate room size, lack of closet space and an insufficient number of bathrooms. Market evidence such as buyer discounts helps measure the loss.
Real-World Application
In a neighborhood of three-bedroom, two-bath homes, an appraiser values a three-bedroom house with one bath. Paired sales show buyers pay less for the single-bath layout, and the appraiser reports that discount as functional obsolescence.
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