Alabama Real Estate Practice Exam

What is an example of external obsolescence?

1. Physical wear and tear

2. A building's outdated layout

3. Change in the neighborhood, like a shift from schools to an old warehouse

4. Internal structural issues

The correct answer is: Change in the neighborhood, like a shift from schools to an old warehouse

External obsolescence refers to a decrease in a property's value due to external factors outside of the property itself. Option C is the correct answer because it represents a change in the surrounding neighborhood, such as a shift in the type of buildings or businesses in the area. Option A is incorrect because physical wear and tear refers to the deterioration of a property's condition over time, which is considered functional obsolescence. Option B is incorrect because a building's layout can be updated and modernized without affecting its value. Option D is incorrect because internal structural issues would fall under functional obsolescence rather than external obsolescence.