What is an example of functional obsolescence?

Functional obsolescence refers to a reduction in a property's usefulness or desirability due to design features that are no longer considered functional or up to modern standards. Outdated design features is a prime example because it highlights how certain layouts, materials, or amenities that were once popular can diminish a property's appeal in today's market. For instance, a home with a small kitchen, inefficient floor plan, or lack of modern conveniences, such as open spaces or energy-efficient appliances, may be perceived as less desirable, thereby impacting its market value.

Other options like wood rot, settlement cracks, and environmental issues relate more closely to physical deterioration or external factors affecting the property rather than an inherent flaw in its design. These are examples of physical obsolescence or maintenance issues, rather than functional design shortcomings. Therefore, outdated design features clearly exemplify functional obsolescence.