What is an “external obsolescence”?

External obsolescence refers specifically to a reduction in property value that arises from external factors outside of the property's physical condition or characteristics. This type of obsolescence is typically linked to influences in the surrounding environment or broader market conditions that negatively impact the desirability or functionality of a property.

Common examples of external obsolescence include factors such as declining neighborhood conditions, proximity to undesirable features (like a landfill or heavy traffic), economic downturns affecting the local market, or changes in zoning laws that could limit property use. The key aspect of external obsolescence is that it is not related to the property itself but rather stems from conditions external to it.

Understanding external obsolescence is vital for appraisers because it helps them accurately assess how external influences can affect property values, ensuring that appraisals reflect true market conditions. This understanding is crucial for making informed decisions about property investments, sales, or refinancing.