What kind of obsolescence is related to a property becoming outdated?

Functional obsolescence refers to a decline in a property’s value due to outdated features or design compared to current standards and preferences. This type of obsolescence occurs when a property's design, layout, or amenities no longer meet the needs or desires of potential buyers or tenants, leading to a diminished appeal in the market. For instance, homes with single bathrooms in an era where multiple bathrooms are the norm may experience functional obsolescence.

Physical obsolescence relates to deterioration from wear and tear, while economic obsolescence involves loss of value due to external factors such as changes in the economic environment or neighborhood decline. Market obsolescence, though not a standard term in appraisal, can suggest shifts in market demand but does not specifically address the property becoming outdated in its functionality or design. Thus, recognizing functional obsolescence is essential for appraisers as it directly influences property valuation.