Functional Obsolescence Can Be Challenging
By McKissock
Excerpts: For appraisers, functional obsolescence can be a challenging concept because the elements that influence property values may not be obvious or immediately apparent. To help you better understand what it means and how to pinpoint it, we’re exploring some examples, the different types of functional obsolescence, and how it can influence property values.
Additionally, we’re sharing insights from appraisers who answered our survey question, “When dealing with functional obsolescence in real property appraisal, what aspect do you find most challenging?”
Topics include:
- Types of functional obsolescence
- Curable obsolescence
- Incurable obsolescence
- Superadequacy
What aspects of functional obsolescence do appraisers find most challenging? We asked our appraisal community, “When dealing with functional obsolescence in real property appraisal, what aspect do you find most challenging?”
The top two answers were “supporting adjustments for it” and “finding comparable properties with similar obsolescence.” Here are the full survey results, followed by comments from appraisers who shared further insights into these two common challenges related to functional obsolescence:
Supporting adjustments: 46%
Finding comps: 33%
Sample appraiser comments:
“Functional obsolescence is not a searchable criterion in any MLS database I’ve found. The ability to find a credible impact on other homes repeatedly is an anomaly. So, I may be able to generate a factor or dollar difference but having only one comp to determine with leaves you deciding on credibility or making no deduction if you don’t feel it’s a credible adjustment.”
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My comments: We all encounter Functional Obsolescence when appraising. The blog post is well-written and understandable. It is worth reading the full blog post and the appraisers’ comments. Plus, the explanations about functional obsolescence are good reminders.
Functional Obsolescence for Appraisers
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NOTE: Please scroll down to read the other topics in this long blog post on home gets 147 offers, cutting costs, manufactured homes, appraisal analysis, unusual homes, mortgage origination stats, etc.