What does functional obsolescence describe in property valuation?

Functional obsolescence refers specifically to a depreciation in the value of a property that arises from changes in its internal design or functionality, which are often not aligned with current market demands or standards. This can occur, for instance, when a home has outdated appliances, an impractical floor plan, or insufficient amenities that the current market finds desirable. These factors render the property less useful or desirable compared to modern properties with updated designs and features, thus leading to a reduction in its market value.

Understanding functional obsolescence is crucial for appraisers and assessors as they evaluate properties, because it emphasizes how the usability and relevance of a property's features significantly impact its valuation.