A 3 bedroom house with one bathroom and a single car garage is an example of:
- economic obsolescence
- functional obsolescence
- curable depreciation
- none of the above
The answer is b.
Functional obsolescence refers to a loss in value of a property caused by one of 3 possibilities:
- unpopular floor plan and layout – if you have a laundry room in the master bedroom, that won’t be too popular. Imagine waking up to the noise of a washer dryer – not cool right?
- Outdated appliances and equipment.
- Poor architectural design. As in the question above, a three-bedroom, one-bath home with a single-car garage is an example of depreciation caused by functional obsolescence. Why? Because most buyers of three- bedroom homes prefer one and one-half or two bathrooms and a two-car garage. Therefore, all other things being equal, the three-bedroom, one-bath home usually sells at a lower price.