California Real Estate Practice Exam

Which of the following would be an example of economic obsolescence?

1. Deferred maintenance

2. Exorbitant tax rates for civic improvements

3. Old fashioned design features

4. Only one bathroom in a two-story residence

The correct answer is: Deferred maintenance

Economic obsolescence refers to a reduction in property value caused by external factors that are beyond the property owner's control. In this context, exorbitant tax rates for civic improvements would be an appropriate example of economic obsolescence. This factor indicates that external economic pressures, such as high taxes implemented to fund local services and improvements, can negatively impact the desirability and value of properties in the area. Deferred maintenance, old-fashioned design features, and the presence of only one bathroom in a two-story residence are typically associated with physical or functional obsolescence, which stem from the property's condition or its layout rather than external economic factors. Therefore, they do not qualify as economic obsolescence. In summary, the example of exorbitant tax rates illustrates how external economic conditions can influence property values in a way that the property owner cannot directly control.