California Real Estate Practice Exam

Economic obsolescence would be created by which of the following?

1. An excessive number of similar properties available in the area

2. Inadequate parking facilities

3. Old fashioned ceiling heights

4. Poor architectural arrangement of floor space

The correct answer is: An excessive number of similar properties available in the area

Economic obsolescence refers to a reduction in property value due to external factors that impact the desirability or functionality of the property. When there is an excessive number of similar properties available in the area, it can lead to market saturation. This oversupply means that there are more properties than demand, causing property values to decline as buyers or renters have many alternatives to choose from. In this context, the presence of numerous similar properties nearby can diminish the appeal of each individual property, leading to increased competition and driving prices down. This is a classic example of economic obsolescence, as it stems from general market conditions rather than the physical condition of the properties themselves. The other options relate more to physical obsolescence or functional issues within individual properties. Inadequate parking facilities, old-fashioned ceiling heights, and poor architectural arrangements all affect the usability and attractiveness of a specific property but do not account for external market forces or conditions that lead to economic obsolescence.