Functional obsolescence in real estate refers to:

Functional obsolescence in real estate specifically refers to intrinsic issues within a property that reduce its efficiency or appeal. This can be due to outdated designs, layouts, or features that no longer meet current standards or buyer preferences. For instance, a home with too few bathrooms for the number of bedrooms, or a property with a layout that is not conducive to modern living styles, exemplifies functional obsolescence.

This concept is distinct from external factors, as well as market demand changes, which pertain to influences outside the immediate property attributes. In addition, natural wear and tear refers to the physical deterioration that occurs over time due to age or use, rather than functional inadequacies. Understanding functional obsolescence helps in assessing a property's value and necessary renovations to improve its marketability.