Economic Obsolescence Defined: Real Estate Vocabulary

by | BiggerPockets.com

economic obsolescenceI’m going to try a new feature here at the BiggerPockets Blog: Real Estate Vocabulary. This feature will look at different concepts in real estate, and explain what they are and why they’re important. The first concept we’re going to cover is Economic Obsolescence.

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Economic Obsolescence: Definition

Otherwise known as Social Obsolescence, economic obsolescence is when the value of a property decreases due to external factors in the neighborhood or immediate area. For example, if the local airport adds a new runway so upon takeoff and landing, airplanes fly directly over your home, the value of your property is likely to fall.

Other possible causes include changes in zoning, recession, adverse traffic changes, freeway construction too close to the property, and loss of major area employers.

The key here is that these changes are irremediable; no matter what you do to your property, these outside changes negatively affect your property value. Appraisers consider economic obsolescence when determining the value of a property.

This is one of the factors that the online home value engines often fail to, or simply cannot consider, when evaluating a property.

About Author

Joshua Dorkin

Joshua Dorkin is a serial entrepreneur, investor, podcaster, publisher, educator, and co-author of How to Invest in Real Estate. He started BiggerPockets to help democratize the real estate investing landscape for himself and others, aiming to make it accessible for everyone, regardless of income or education. Today, BiggerPockets is the premier real estate investing website online with over one million members and reaching over 70 million people with the message of financial freedom through real estate investing. Joshua, along with his wife and three daughters, make their home in Denver, Colorado, and spend any time they can traveling, exploring, and adventuring. Read more about Joshua’s story in 5280 and Inc.com.

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