Which type of obsolescence refers to a loss in value due to deficiencies in the structure?

Functional obsolescence refers to a loss in value that arises from deficiencies in a property's design or utility. This includes aspects such as outdated layouts, inadequate amenities, or inefficient systems that fail to meet modern standards or buyer expectations. When a structure is unable to serve its intended purpose effectively or efficiently, it suffers from functional obsolescence. This type of obsolescence is particularly important for appraisers to recognize as it can significantly impact a property's marketability and value.

On the other hand, physical obsolescence relates to wear and tear or damage to the physical structure itself. Economic obsolescence pertains to external factors affecting property value, such as changes in the market, neighborhood decline, or increased crime rates. Environmental obsolescence deals with the surrounding environmental factors that adversely affect the property's appeal or desirability. Each of these types of obsolescence plays a unique role in real estate valuation, but functional obsolescence specifically addresses the internal deficiencies that diminish a structure’s value.