What defines functional depreciation in residential properties?

Functional depreciation refers to the loss of property value due to deficiencies or inadequacies in the design, layout, or usefulness of a property that do not meet contemporary standards. In the context of residential properties, poor placement of bathrooms is a prime example of functional depreciation because it reflects an inefficiency in the property's design that negatively impacts usability. If a bathroom is located inconveniently, it can significantly lessen the appeal of the property, as it may affect the overall living experience and convenience for residents.

While obsolete building materials, wear and tear from aging, and property location in a declining area can contribute to depreciation, they represent different types of depreciation. Obsolete materials pertain to physical depreciation and condition rather than functionality, wear and tear relates more to overall physical condition over time, and the location aspect often ties in with external factors affecting property value. Thus, poor placement of bathrooms is specifically indicative of functional issues within the property's design and layout.