When evaluating property, what does economic obsolescence signify?

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Economic obsolescence refers to a decrease in a property's value resulting from external factors that are outside the control of the property owner. These factors often include changes in the surrounding environment, such as the decline of the local economy, changes in zoning laws, or the establishment of undesirable developments nearby (like factories or highways). Because these influences originate from outside the property itself, they can significantly diminish the property's attractiveness and, consequently, its market value.

Recognizing this concept is essential for real estate professionals as they assess property values and advise clients. Understanding that economic obsolescence stems from external threats helps in accurately determining the potential impact on investment decisions and strategies for addressing any depreciation in market value.

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