July 2002 


Source: Dictionary of Real Estate Terms-Second Edition, Jack P. Friedman-Jack C. Harris-J. Bruce Lindeman

Source: How to Buy & Sell Apartment Buildings, Eugene E. Vollucci/John Wiley & Sons (Publisher) 


Obsolescence is a loss in value due to reduced desirability and usefulness of a structure because its design and construction has become obsolete: loss due to a structure's becoming "old-fashioned", not in keeping with modern needs, with consequent loss of income.

EXAMPLE: An old house may suffer from the following examples of obsolescence:

Rooms of improper size: features no longer useful, such as a coal chute with a gas-fired furnace: out-of-date plumbing, heating, and electrical fixtures and systems: inadequate insulation: unsuitable architectural style: construction materials that require excessive maintenance: undesirable location:  

Functional obsolescence occurs when styles or construction methods change.

EXAMPLES: Victorian as opposed to modern, wood shingles to new fire-retardant materials, fuses to circuit breakers, water coolers to air conditioners: this type of obsolescence can be cured by using updated materials & equipment. 


Physical obsolescence refers to day to day wear & tear on a building or property by continual usage and climatic conditions. As things get old they deteriorate. That's life. That's nature. A determination should be made as to whether or not the deterioration is irreversible. If it is, do not purchase, the building should be demolished. 

Economic obsolescence is a result of circumstances not directly related to the property. It is caused by location problems. A change in zoning laws from residential to commercial or industrial, is an example.  

A management plan must rank according to priority those components of repair that will improve cash flow and maintain the building.


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This web page was updated on 07/03/2002