New York State Real Estate Salesperson Licensing Exam

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What is the term for when a building loses value due to outdated features?

Depreciation
Obsolescence
Externality impact
Value degradation

The correct answer is: Obsolescence

The term that describes when a building loses value due to outdated features is known as obsolescence. This concept refers specifically to a decrease in desirability or usefulness of a property caused by changes in design trends, technology, or consumer preferences. Obsolescence can manifest in various ways, such as outdated floor plans, aging appliances, or features that no longer meet the current lifestyle or aesthetic standards of potential buyers or tenants. For example, a home with a very small kitchen in a market that values open-concept living may see decreased value due to this factor of obsolescence. The other terms, while related to value loss, refer to different aspects. Depreciation generally refers to the overall decrease in value of a property over time, which can occur due to physical wear and tear, poor maintenance, or market conditions rather than just outdated features. Externality impact relates to influences from outside factors that affect a property's value, and value degradation is a broader term that isn't specific enough to detail the causes of the decline in property worth. Obsolescence is the most accurate term for the specific situation where outdated features specifically lead to a loss in property value.