Market evidence isolates a subject value loss from off-site landfill odors. Which listed cause is an external-obsolescence influence?
Correct Answer
D) Off-site landfill odors with a supported market effect
A supported loss from an off-site landfill influence is external obsolescence. Internal layout problems, kitchen conditions and deferred maintenance are different causes of potential loss. The presence of a landfill alone would require market analysis before quantifying an effect.
Why This Is the Correct Answer
Option D is correct because adverse factors external to the property being appraised cause external obsolescence and a loss in value. Odors from an off-site landfill come from outside the subject, and the market evidence supports a measurable effect. That combination identifies an external obsolescence influence.
Why the Other Options Are Wrong
Option A: An internal layout problem within the subject house
Option A, an internal layout problem within the subject house, is a design problem inside the property. That is a form of functional obsolescence, not an external influence.
Option B: An obsolete kitchen within the subject dwelling itself
Option B, an obsolete kitchen within the subject dwelling itself, is a deficiency in the improvements. It is a functional issue inside the property, not a factor external to it.
Option C: Deferred maintenance on the subject’s own improvements
Option C, deferred maintenance on the subject's own improvements, is physical deterioration of the property. It originates within the subject, so it is not external obsolescence.
Lot Line Test: Inside or Outside
Problems inside the walls or on the house itself are physical or functional. Problems coming from beyond the lot line are external.
How to use: Use the lot line as the dividing test when sorting causes of depreciation.
Exam Tip
Ask where the cause originates: on the property or off it. Off-site causes with a market effect point to external obsolescence.
Common Mistakes to Avoid
- -Classifying an outdated kitchen as external obsolescence
- -Assuming a nearby nuisance causes a loss without market evidence
- -Treating deferred maintenance as an external factor
Concept Deep Dive
Analysis
This question tests the distinction between external obsolescence and other causes of loss. External obsolescence comes from adverse factors outside the property being appraised. Of the choices, only off-site landfill odors with a supported market effect originate outside the subject.
Background Knowledge
Depreciation in the cost approach is commonly divided into physical deterioration, functional obsolescence and external obsolescence. Physical and functional problems are within the property, while external obsolescence comes from outside it. The presence of a nearby nuisance does not by itself establish a loss; market analysis is needed to support and quantify any effect.
Real-World Application
An appraiser values a house about a mile from a landfill. Paired sales show homes downwind sell for less than similar homes farther away. She identifies the odor as an external influence and supports the amount of external obsolescence with that market data.
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At the same effective date, reliable value indications support $800,000 for continued use of a property as improved and $500,000 for its cleared site. Immediate demolition costs $100,000. These are the only feasible alternatives, with no other costs or timing differences. Which alternative has the higher net value?