How is Incurable Functional Obsolescence typically measured?

How is Incurable Functional Obsolescence typically measured?

• A. Using comparative property analysis
• B. Through two methods: Sales Comparison and Capitalization of Income loss
• C. Based on the original construction costs
• D. By assessing local market conditions only

Answer: (B)

Incurable functional obsolescence is a type of depreciation that occurs when a property has features that are outdated or undesirable and cannot be feasibly corrected. This can arise from issues such as ineffective layout, poor design, or outdated amenities that no longer meet market demands. The measurement of this obsolescence typically employs two primary approaches: the Sales Comparison method and the Capitalization of Income Loss method. The Sales Comparison method involves comparing the subject property to similar properties that have recently sold, adjusting for differences to determine how much less the subject property is worth due to its functional deficiencies. The Capitalization of Income Loss method, on the other hand, estimates the income that the property could have generated if not for the obsolescence, then capitalizes that income loss to quantify the impact on the property’s value. Using these two methods allows appraisers to provide a well-rounded and substantiated evaluation of how incurable functional obsolescence affects a property's value, taking into account both market trends and income potential.

Incurable functional obsolescence is a type of depreciation that occurs when a property has features that are outdated or undesirable and cannot be feasibly corrected. This can arise from issues such as ineffective layout, poor design, or outdated amenities that no longer meet market demands.

The measurement of this obsolescence typically employs two primary approaches: the Sales Comparison method and the Capitalization of Income Loss method. The Sales Comparison method involves comparing the subject property to similar properties that have recently sold, adjusting for differences to determine how much less the subject property is worth due to its functional deficiencies. The Capitalization of Income Loss method, on the other hand, estimates the income that the property could have generated if not for the obsolescence, then capitalizes that income loss to quantify the impact on the property’s value.

Using these two methods allows appraisers to provide a well-rounded and substantiated evaluation of how incurable functional obsolescence affects a property's value, taking into account both market trends and income potential.