Arizona Real Estate License Practice Exam 2025 - Free Real Estate Practice Questions and Study Guide

Functional obsolescence refers to a loss of value in a property that arises from inefficiencies or inadequacies in its design or layout, which may no longer align with current buyer preferences or standards. This could include factors such as outdated features, poor room layouts, or a lack of modern amenities that diminish the property's appeal and marketability.

In contrast, depreciation is a broader term that encompasses not only functional obsolescence but also other forms of value loss, such as physical deterioration and external obsolescence caused by external factors affecting the property's value. Curb appeal relates to the aesthetic appeal of a property's exterior, which influences first impressions but does not directly describe value loss. Investment return refers to the profitability gained from an investment and is unrelated to property value losses.

Understanding functional obsolescence is crucial for real estate professionals, as it directly influences property assessments, pricing, and marketing strategies.