Certified Pennsylvania Evaluator Practice Exam

What type of depreciation would likely include factors such as the presence of a power plant nearby?

1. Physical Deterioration

2. Functional Obsolescence

3. Economic Obsolescence

4. Super-adequacy

The correct answer is: Economic Obsolescence

Economic obsolescence refers to a loss in property value due to external factors that are outside the control of the property owner. The presence of a power plant nearby can negatively impact the desirability of a property, potentially leading to reduced market values due to factors such as noise, pollution, or other environmental concerns. These influences are not related to the physical condition of the property (which would pertain to physical deterioration) or to internal functional aspects (which would link to functional obsolescence). Instead, they are external market conditions that impact valuation, making economic obsolescence the fitting choice in this context.