Which stated cause of supported value loss is external?
Correct Answer
A) Noise from a newly adjacent highway.
The stipulated off-site highway noise reduces value and is an external influence. A bathroom utility deficiency is functional, and leaking roofing or worn carpet is physical. A highway’s presence alone would not prove a discount if it also provided benefits.
Why This Is the Correct Answer
Option A is correct because verified noise from a newly adjacent highway is an off-site influence that reduces value, which is external obsolescence. External obsolescence arises from environmental or economic factors outside the property, such as nearby incompatible uses.
Why the Other Options Are Wrong
Option B: An internal bathroom utility deficiency.
Option B, an internal bathroom utility deficiency, is wrong because a design or utility shortfall inside the home is functional obsolescence, not external.
Option C: A leaking roof from worn materials.
Option C, a leaking roof from worn materials, is wrong because wear on a building component is physical deterioration, not an external cause.
Option D: Worn carpeting from normal use.
Option D, worn carpeting from normal use, is wrong because wear from use is physical deterioration, not an influence from outside the property.
Outside the lot line
If the cause is beyond the property line, it is external. Inside, it is physical or functional.
How to use: Use the lot line as the dividing test when choosing between external and the other two categories.
Exam Tip
Ask where the cause is located. A nearby road, plant or economic change points to external; worn items point to physical; poor design points to functional.
Common Mistakes to Avoid
- -Calling a bathroom design shortfall external
- -Treating a worn roof as functional obsolescence
- -Assuming a nearby highway causes a loss without market evidence
Concept Deep Dive
Analysis
This question tests recognizing external obsolescence. External obsolescence comes from influences outside the property boundaries. Of the four causes, only highway noise originates off-site.
Background Knowledge
External obsolescence is a loss in value from factors outside the property, such as environmental nuisances or shifts in the local economic base. Functional obsolescence comes from design or utility issues within the property, and physical deterioration comes from wear and damage. External obsolescence is generally not curable by the owner.
Real-World Application
After a highway is built next to a subdivision, an appraiser finds paired sales showing homes backing onto it sell for less. The appraiser attributes the supported discount to external obsolescence.
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