In real estate, functional obsolescence generally refers to:

Functional obsolescence pertains specifically to the decrease in a property's value stemming from its outdated features or designs, which may not meet current market demands or buyer preferences. This concept is fundamental in real estate valuation, as it highlights how certain characteristics—such as a poor layout, lack of modern amenities, or inadequate parking—can result in a property being less desirable compared to newer options or those with more favorable features.

For instance, a home with a floor plan that does not accommodate contemporary living styles, such as having separate and isolated rooms rather than an open-concept layout, may struggle to retain its value in a market that favors modern designs. This idea emphasizes the importance of adapting to changing consumer tastes and expectations to maintain a property’s value.

The other options discuss concepts related to real estate but do not accurately define functional obsolescence. Physical deterioration refers to the physical wear and tear of a property, while market fluctuations involve changes due to external economic factors. Both are important in the context of property valuation, but they do not encompass the specific issues of design and functionality that define functional obsolescence. The notion of increased property value over time contradicts the very essence of obsolescence, which inherently involves a loss in value rather than a gain