In real estate, Functional Obsolescence refers to a loss in value caused by outdated design, features, or equipment that no longer meet current market standards or buyer expectations. This can occur even if the property is physically sound, due to advances in construction methods, technology, or changes in consumer preferences.
Functional obsolescence may be curable or incurable, depending on whether the cost of correcting the deficiency is economically justified. Common examples include poor floor plans, inadequate ceiling heights, or obsolete mechanical systems. It is an important factor in property appraisal and depreciation analysis.
