What does the term "functional obsolescence" refer to in property assessment?

Functional obsolescence refers to a reduction in property value that results from features or designs that are no longer considered desirable or efficient due to changing market preferences, technologies, or building codes. This can occur when a property has outdated amenities, poor layout, or architectural styles that do not meet current expectations of buyers. For example, a home with a single bathroom in a neighborhood where most houses boast multiple bathrooms would likely experience functional obsolescence, as it doesn't align with modern expectations or needs.

The other options do not accurately describe functional obsolescence. Natural disasters, while they can impact property value, do so through physical damage rather than functional inadequacies. Market fluctuations relate to broader economic changes rather than specific deficiencies in the property itself. Lastly, increased property values due to neighborhood development would reflect a positive change rather than a decline caused by obsolescence. Understanding functional obsolescence is crucial for assessors as they evaluate properties and determine their market value based on current trends and buyer expectations.