What is the exam-ready distinction?
| Roadmap post | 185 of 500 |
|---|---|
| Official syllabus topic | Valuation and Market Analysis: Cost Approach; Depreciation and Obsolescence |
| Official PSI area | Valuation and Market Analysis |
| Published weight | 8% of the 100-question national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
| Content checked through | August 2, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Physical | Functional | External |
|---|---|---|---|
| Source | Wear, age, damage, or deferred maintenance | Design, layout, capacity, or feature inadequacy | Condition outside the property |
| Example | Worn roof | Poor floor plan or obsolete system | Nearby highway noise or regional employment loss |
| Curability | Compare cure cost with value restored | Compare cure cost with value restored | Usually outside the owner's control |
| Cost-approach role | Deduction from improvement cost | Deduction from improvement utility | Deduction reflecting external market loss |
Decision rule
Georgia-specific distinction
Worked example
Scenario. A house loses value after a noisy limited-access highway opens beside the subdivision.
Reason it through. The cause is outside the property and an individual owner cannot relocate the highway.
Answer. The loss is external obsolescence and is usually incurable by the owner.
Common exam traps
- Calling every old feature physical
- Treating curable as physically possible
- Assuming external loss is permanent in every market
- Subtracting depreciation from land in the ordinary cost formula
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A poor interior layout is usually classified as what?
- A. External obsolescence
- B. Functional obsolescence
- C. Physical deterioration only
- D. Plottage
Show answer and explanation →
Answer: B. Functional obsolescence
Functional obsolescence is correct. Physical deterioration comes from wear or damage. Functional obsolescence comes from a property's design or feature problem. External obsolescence comes from outside the property. Curability is a separate economic question: a defect is curable when the value restored justifies the cure cost under the appraisal framework. The rejected choices are External obsolescence; Physical deterioration only; Plottage. Each misses the legal category or controlling fact stated in the rule.
Question 2A house loses value after a noisy limited-access highway opens beside the subdivision.
- A. It is physical deterioration because sound reaches the house.
- B. It is functional obsolescence because buyers dislike it.
- C. The loss is external obsolescence and is usually incurable by the owner.
- D. It is automatically curable by repainting.
Show answer and explanation →
Answer: C. The loss is external obsolescence and is usually incurable by the owner.
The cause is outside the property and an individual owner cannot relocate the highway. Therefore, The loss is external obsolescence and is usually incurable by the owner. The other choices fail because they replace those controlling facts with a neighboring concept or an unsupported absolute rule.
Question 3What should a candidate identify first when comparing Physical Deterioration Versus Functional and External Obsolescence?
- A. The option with the longest definition, without classifying the facts.
- B. A memorized Georgia rule, even when the question asks for a national concept.
- C. The answer that sounds most favorable to the buyer, regardless of the document or event.
- D. Locate the source of the loss first, then compare cure cost with the value the cure would restore.
Show answer and explanation →
Answer: D. Locate the source of the loss first, then compare cure cost with the value the cure would restore.
Locate the source of the loss first, then compare cure cost with the value the cure would restore. That sequence identifies the legal category before the label. Choosing by definition length ignores the facts, importing a Georgia rule can answer the wrong jurisdictional question, and favoring one party substitutes sympathy for classification.
Mastery tracking
Mark this distinction mastered only when every statement is true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one controlling fact.
- Explain why every trap and distractor is tempting but wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Progression Versus Regression. Continue to roadmap comparison 186.
Return to the complete exam-concept library or the Valuation and Market Analysis hub.