Real Estate Appraisal Practice Exam 2025 – All-in-One Resource to Master Your Appraisal Certification!

The term that represents a loss of value due to external factors is economic obsolescence. This type of depreciation occurs when the value of a property decreases due to external conditions affecting the property rather than the property itself. Factors can include changes in neighborhood dynamics, economic downturns, or the construction of undesirable developments nearby, such as highways or factories. These external influences can significantly impair the property's market value despite its physical condition.

In contrast, functional obsolescence refers to a reduction in property's value due to outdated features or poor design that affect its utility. Physical depreciation relates to the wear and tear on a property from age or physical damage. Curable depreciation applies to situations where repairs or upgrades can be made at a reasonable cost to bring a property back to a desirable condition. Therefore, economic obsolescence is distinct as it highlights value loss linked to external, uncontrollable factors.