Have you ever heard the term "functional obsolescence?" Maybe you've seen it on an appraisal or heard it from an appraiser without an explanation of what it means. This is an appraisal/real estate jargon phrase, and the definition is: A reduction in the usefulness or desirability of an object because of an outdated design feature, usually one that cannot be easily changed. Although this is more common in older homes, it can happen to any home as a result of lack of maintenance. There are two general kinds of functional obsolescence:
- Incurable Functional Obsolescence
Though the name suggests that this kind of obsolescence cannot go away, that is not always the case. Whether
An extreme example of functional obsolescence! functional obsolescence is curable or not is determined by how much it costs to cure, and how much this increases value. One example of incurable could be a one car garage. In today's market, a one car garage is functionally obsolete and homes are (almost) never built with less than a two car garage. Say that it costs $10,000 to add another car onto the garage, but it will only increase sales price of your home by $5,000. Because you have lost on your investment, this would be incurable functional obsolescence. Does that mean, however, that you shouldn't build another car on if you really want to? Of course not! It's your house, and you live there. If you want to add something that might not return your investment, that is totally up to you. It's always a good idea to be informed, though! Another example of functional obsolescence that can be impossible to even consider "curing" is layout issues. In some old houses, a bedroom can be positioned behind another bedroom, so that you have to walk through the other bedroom to enter or leave. This is functional obsolescence that, short of tearing down the bedroom, can be impossible to address.
- Curable Functional Obsolescence
For somethingto be "curable," the costmust be worth the investment. For example, an older home with 3
This kitchen, though everything may be in working condition, is functionally obsolete due to its lack of updates. bedrooms and 1 bathroom would be functionally obsolete in today's market. 1 bathroom is simply not enough for the number of people who would live in a 3 bedroom, and it is undesirable for today's buyers. Typically, homes with 2 bathrooms sell for much more than one bathroom, and it would probably be worth it to install a second bathroom.
Whether something is "curable" or "incurable" depends largely on the home and the market area. Some markets might react strongly to a new kitchen, while in others you might not see much of a difference. It's important to remember that functional obsolescence does not necessarily reflect the livability or even condition of the home. A home might be kept in great condition, but if it is hopelessly out of style, it has functional obsolescence.
Have you ever seen or experienced functional obsolescence? Were you able to cure it?
