What defines functional obsolescence?

Functional obsolescence refers to a reduction in a property's value caused by outdated design elements, features, or layouts that are no longer considered desirable or efficient. This concept captures the idea that certain aspects of a property, while they may be structurally sound, do not meet the current market preferences or technological advancements. For example, homes that lack modern open floor plans, energy-efficient systems, or even basic amenities like sufficient bathrooms can experience functional obsolescence. Thus, this definition highlights how these physical and design limitations can impact a property's appeal and market value.

In contrast, options like a decrease in property size may influence value but does not specifically relate to usability or desirability in terms of design. Higher maintenance costs are typically associated with physical depreciation rather than obsolescence tied to design flaws. A shift in neighborhood demographics can affect values indirectly but is not a direct cause of functional obsolescence as it's more about changing market dynamics rather than the functionality of the property itself.