What factor primarily indicates functional obsolescence?

Functional obsolescence refers to a reduction in the desirability or utility of a property due to factors that affect its function or appeal. Outdated design features primarily indicate functional obsolescence because they represent a disconnect between the property’s layout, amenities, and modern standards or buyer preferences. For example, if a home has a layout that is inefficient or lacks modern conveniences such as open spaces, it may not appeal to contemporary buyers, thus affecting its value despite not being physically deteriorated.

While an increase in property size could potentially enhance value by offering more space, and a decrease in market demand could influence overall property values, neither directly equates to functional obsolescence. Similarly, new zoning laws might change how a property can be used but don’t inherently make the property less functional. Outdated design features are a direct indication of functional obsolescence, as they reflect the property’s inability to meet the current needs or desires of the market.