Nationwide Mortgage Licensing System (NMLS) Practice Exam

A property with five bedrooms and only one bathroom is classified as an example of what type of obsolescence?

1. Appreciation

2. Functional Obsolescence

3. Economic Obsolescence

4. Residential Obsolescence

The correct answer is: Functional Obsolescence

The classification of a property with five bedrooms and only one bathroom as functional obsolescence is correct because functional obsolescence refers to a reduction in a property's value due to outdated features or poor design that fail to meet the current market demands or standards. In today’s real estate market, a home with multiple bedrooms typically is expected to have multiple bathrooms to accommodate the needs of its occupants. The single-bathroom configuration in this scenario suggests that the property does not functionally serve the needs of potential buyers or renters, which can lead to a decrease in its marketability and overall value. Functional obsolescence can arise from various factors, including design flaws, inadequate amenities, or outdated features that do not align with current preferences. While appreciation, economic obsolescence, and residential obsolescence pertain to different aspects of property valuation, they do not address the specific issue of the outdated design in this case. Thus, identifying the lack of bathroom facilities as functional obsolescence highlights the importance of matching a property's layout to contemporary living expectations.