California Real Estate Practice Exam

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What does an apartment with single garages facing competition from a nearby new unit with double garages illustrate?

Economic obsolescence
Functional obsolescence
Physical deterioration
Social obsolescence

The correct answer is: Economic obsolescence

An apartment with single garages facing competition from a nearby new unit with double garages illustrates functional obsolescence. This concept refers to a decline in the desirability or utility of a property due to outdated features or design compared to newer alternatives. In this case, the single garages may not meet current market expectations for convenience and utility, especially when there is a newer unit offering double garages, which are more appealing to potential renters or buyers. The presence of a newer property with features that better satisfy current market demands highlights the functional shortcomings of the existing apartment. This mismatch can lead to reduced property value and decreased demand, illustrating how functional obsolescence occurs in real estate.