A low-cost apartment building remodeled with very expensive high-end plumbing fixtures creates a super-adequacy. This is an example of which type of obsolescence?

• A. Physical deterioration
• B. External obsolescence
• C. Curable depreciation
• D. Functional obsolescence

Answer: (D)

Functional obsolescence occurs when a property's features no longer meet the market's needs or expectations, often due to over-improvement or a mismatch between the unit's design and its price tier. Here, remodeling a low-cost apartment building with very expensive plumbing fixtures creates a super-adequacy—the high-end quality is more than the market for that building expects or will pay for. That mismatch reduces usefulness and market value because tenants and buyers don’t value the luxury in this context, so the property underperforms relative to its cost. External obsolescence would involve factors outside the property, and physical deterioration is wear and tear, not a misfit of design or quality. Curable depreciation could apply if the excess cost could be removed at a favorable cost-to-value ratio, but the fundamental issue driving the loss in value is functional obsolescence.