What does obsolescence refer to in personal property assessment?

Obsolescence refers to a decrease in property value that occurs as a result of external factors, which can include shifts in market demand or changes in the economic environment surrounding the property. In the context of personal property assessment, it often relates to how external conditions affect the desirability or utility of an asset. For example, if a new technology emerges that renders certain equipment less efficient or desirable, the value of the older equipment would diminish in the eyes of potential buyers, reflecting obsolescence.

The correct understanding of obsolescence helps assessors recognize that property value can be influenced by forces outside of the property's inherent characteristics or the management decisions within a business. Consequently, elements such as functional obsolescence (caused by internal factors) are distinguished from economic obsolescence (driven by external, market-related issues), highlighting the complexity of value assessment in the personal property realm. Understanding these distinctions is crucial for accurately appraising and reporting on the value of personal property.