California Real Estate Practice Exam 2025 - Free Real Estate Practice Questions and Study Guide

Economic obsolescence refers to a reduction in the value of a property caused by external factors that are beyond the control of the property owner. This can often be due to changes in the surrounding community or environment.

Improperly placed improvements typically refer to issues related to the physical aspects of a property, such as the layout or configuration of buildings and structures. While these can affect a property’s appeal and marketability, they do not stem from external economic factors but rather from the decisions made during the construction or renovation process. Therefore, improperly placed improvements do not qualify as a cause of economic obsolescence.

In contrast, industries moving out of the neighborhood, old fashioned kitchens, and unfavorable zoning changes are all external factors that can impact property values. Industries leaving can lead to decreased local employment and diminished neighborhood desirability, while old fashioned kitchens may indicate that the property is not keeping up with current market trends—a form of functional obsolescence rather than economic. Unfavorable zoning changes can directly affect the property’s use and its surrounding environment, leading to potential depreciation in value. Consequently, the understanding of economic obsolescence is essential for evaluating how broader market trends and community changes can influence property values.