Picture this: you just got a great new home, and you and your spouse are very happy with it. Just one problem! There is a one car garage and you have two cars, your driveway is not big enough for the extra car, and there is no street parking! AND both you and your wife need to use your cars on a regular basis!
Obsolescence is a form of depreciation which results in a loss in value even though the property is still in good condition.
Functional obsolescence is due to conditions within the property as opposed to economic obsolesce, which is due to reasons outside the property.
Some examples of functional obsolescence are :
- Poor design
- Too many or too few materials
- Excess construction
- Lack of utility (in other words there are features that are not practical or desirable)
- Overly costly operating expenses