The impairment of functional capacity or
efficiency and reflects the loss in value
brought about by such factors as
overcapacity, inadequacy, and changes in
technology that affect the property item
itself or its relation with other items
comprising a larger property. A structure is
said to be functionally obsolete when it
cannot adequately perform the function for
which it is currently employed. The method
used to estimate loss of value varies based
on the form of functional obsolescence.
Curable
Described as loss of value due to
deficiencies or superadequacies, that the
prudent owner or buyer would be justified in
replacing, adding, or removing because the
cost of effecting a cure would be at least
offset by the anticipated increase in
utility, and ultimately in market value.
Deficiency refers to an inability to
perform to today’s standards owing to some
missing item (requiring an addition), e.g.,
installation of smart building technology
for energy conservation including software,
hardware, and communication links, or
inadequacy regarding the improvements
(requiring a substitution or
updating/modernization), e.g., a 100 amp
electrical service that can be easily
converted to 200 amp for a cost that is less
than the value that would accrue to the
property by its addition. A superadequacy
might involve high ceilings in a structure
that affect both overall appearance and
heating costs. The lowering of the ceilings
not only reduces energy costs, but also
improves overall appearance resulting in an
increase in market value exceeding the cost.
Incurable
Loss in value due to deficiencies or
superadequacies that the prudent buyer or
owner would not be justified in replacing,
adding, or removing because the cost of
effecting a cure would be greater than the
anticipated increase in utility or market
value resulting from the replacement,
addition, or removal.
While the correction of the problem may
be physically or technically possible, such
a change is termed incurable because the
typical buyer would not make the correction
because the cost would be greater than the
anticipated increase in value. In other
words, it would not make economic sense to
correct the obsolescence and most buyers
would not do so.
Two types of incurable functional
obsolescence exist: deficiency and
superadequacy. A deficiency might relate to
the lack of internal air-conditioning and
associated ductwork with no cost effective
method to remedy. Superadequacy might
involve an over improvement that does not
realize any economic benefit, e.g., excess
number of parking spaces.
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