Certified Pennsylvania Evaluator Practice Exam

Which type of obsolescence results from external factors, such as poor neighborhood conditions?

1. Functional Obsolescence

2. Physical Deterioration

3. Economic Obsolescence

4. Super-adequacy

The correct answer is: Economic Obsolescence

The correct answer is economic obsolescence, which occurs due to external factors that negatively impact property value. Unlike functional obsolescence, which is related to the property's design or layout issues that arise from internal characteristics, or physical deterioration that involves wear and tear due to age or use, economic obsolescence stems from outside influences. Such external factors may include declines in the neighborhood's desirability, adverse economic conditions, changes in industry or community infrastructure, or other localized detrimental issues that affect property values. For example, if a neighborhood experiences an increase in crime rates or a significant reduction in local services that make the area less attractive, properties in that area can face a drop in value as buyers perceive them as less desirable. Super-adequacy refers to features of a property that exceed the standards or needs of the market, typically resulting in negative value return on those excesses. In summary, economic obsolescence is specifically linked to influences from the surrounding environment, reinforcing how external conditions can significantly affect property assessment and valuation.