What is functional obsolescence?

In the cost-depreciation approach to valuation, functional obsolescence is a loss in value due to the property failing to meet current standards expected by consumers

For example, a 4 bedroom home that was built in the 1950’s has 1 bathroom; current consumer preferences call for more than one bathroom for four bedrooms

The property can be said to be functional obsolete since it fails to meet current consumer expectations

The property owner can cure this obsolescence by installing one or more bathrooms, provided the cost of such improvements is economically feasible