What are some common examples of functional obsolescence?
One of the best ways to understand functional obsolescence is by looking at examples. Below are some of the most common factors that lead to a property being considered functionally obsolete in real estate. Be sure to keep these factors in mind as you search for properties to add to your portfolio and to do your best to avoid them.
Busy roads
In general, properties that are located on busy roads are considered less desirable. On the one hand, traffic patterns may make it difficult to pull in and out of the driveway on a regular basis as well as unsafe for children to play in the surrounding area. On the other, the constant sounds of ongoing traffic can cause noise pollution.
Mismatched numbers of bedrooms and bathrooms
Homes that have a mismatched number of bedrooms and bathrooms for their square footage may also be considered functionally obsolete. For example, imagine a home that is only 900 square feet but has three bedrooms. Those bedrooms would be so small that they would be considered functionally obsolete.
The same would be true of a five-bedroom house that only has one bathroom. In that case, there would likely be too many people living in the home for one bathroom to make sense. After looking at this type of property, most buyers would continue to search for a home that better suited their needs.
Physical deterioration
While physical deterioration from deferred maintenance is fixable, it's also considered a form of functional obsolescence. This is especially true if all the other homes in the neighborhood are well-kept. If there are better options around, strong evidence of deferred maintenance will lower the property's overall desirability.
