Stanley D. Longhofer
Final draft: February 2021
The Appraisal Journal, Spring 2021, vol. 89, no. 2, pp. 95-103.
External obsolescence is perhaps one of the trickiest aspects of implementing the cost approach in appraisal. Because it is driven by factors outside the property, it is important for appraisers to make sure that these factors do not also impact the land value estimate used to derive a final indication of value. In other words, external obsolescence is prone to double counting. This paper argues that the external obsolescence can only arise when the existing structure is not the site’s highest and best use. As a result, external factors that affect the property’s value are attributable to the land if the current use is its highest and best use and are external obsolescence of the building otherwise.
This article received 2021 Richard U. Ratcliff Award for the most outstanding academic article published in The Appraisal Journal during the year.