When you’re buying or selling a home, it's easy to focus on the obvious—location, square footage, curb appeal. But there's another factor that can significantly impact a property's value and marketability: functional obsolescence.

While it might sound like technical jargon, understanding what functional obsolescence is (and how it affects real estate) can give both buyers and sellers a serious edge in today’s market.

What is Functional Obsolescence?

Functional obsolescence refers to a reduction in a property’s usefulness or desirability due to an outdated design, layout, or feature—even if the property is still in good condition. Unlike physical deterioration, which relates to wear and tear, functional obsolescence is about how well the property functions for modern living standards.

It’s not always visible at first glance, but it can influence buyer perception and, ultimately, the property’s value.

Common Examples

• Outdated floor plans – Think small, closed-off kitchens or homes without an open-concept layout, which many modern buyers prefer.

• Lack of essential features – A three-bedroom home with only one bathroom can be considered functionally obsolete, even if the house is well-maintained.

• Older systems – HVAC, plumbing, or electrical systems that no longer meet current efficiency or safety standards.

• Poor bedroom access – A bedroom you have to walk through another room to get to? That’s a red flag.

• Low ceilings or odd room shapes – These may have been normal decades ago, but they can feel cramped or awkward today.

Curable vs. Incurable Obsolescence

Functional obsolescence comes in two flavors:

• Curable: These issues can be fixed cost-effectively. For example, knocking down a wall to open up the kitchen might solve the problem and increase value.

• Incurable: These are more difficult or expensive to remedy—like a home built below street level or a layout that can't be altered due to structural limitations.

How It Affects Property Value

Appraisers and buyers take functional obsolescence seriously. A home with outdated features may sell for less or sit longer on the market. It can also affect financing, as lenders consider the overall marketability and usability of a home when approving loans.

What Sellers Can Do

• Update strategically: Focus on improvements that address layout or utility issues—like adding a second bathroom or opening up key living spaces.

• Stage for function: Show buyers how to use awkward spaces creatively.

• Price accordingly: If the obsolescence is incurable, be realistic about pricing and highlight the home’s strengths in other areas.

What Buyers Should Consider

• Look past the surface: Cosmetic updates can be distracting, but layout and function are harder (and costlier) to change.

• Think long-term: Will the home's layout work for your lifestyle now and in the future?

• Negotiate smart: Functional flaws can give you room to negotiate a better deal.

Final Thoughts

Functional obsolescence isn’t always a dealbreaker—but it’s definitely a deal shaper. Whether you're buying, selling, or just keeping an eye on the market, understanding this concept can help you make smarter, more informed decisions.