If you’re considering buying a piece of commercial property here in Sonoma County, you’re likely going to be spending a sizable amount of money. You may want this property to increase in value over the years so that you can be able to steadily increase rents and ultimately sell it for a profit.
Of course, no one can predict what the future will bring. Whether it’s natural disasters like earthquakes and wildfires or man-made upheaval like a downturn in various industries or population movement out of the area, California property owners can never really know what to expect.
You can, however, do extensive due diligence to learn everything you can about the property, the area and anticipated changes that could significantly affect the value of your property. One issue that shouldn’t catch you by surprise is “functional obsolescence.”
What is functional obsolescence?
Functional obsolescence is defined as “the impairment of functional capacity of a property according to market tastes and standards.” Unlike outdated furniture or interior design features, functional obsolescence generally refers to something about a property that can’t be easily changed or fixed. By knowing whether a property has any of these “impairments,” you can more knowledgeably decide whether to look elsewhere or possibly seek a price cut to account for any changes you might be required to make and be sure you’re not paying more than the property is worth.
Functional obsolescence doesn’t necessarily need to be a characteristic of the property itself – like perhaps not having the accessibility features required under state and federal law. It can be something completely external to the property.
This can include things like planned zoning changes that will significantly change the surrounding area or a planned freeway or other construction that could make the property more difficult to get to. It could be a slow but steady economic decline in the area. External obsolescence can involve environmental factors like a nearby facility with the potential to have a toxic gas leak.
You can see why it’s critical to do as much research as possible to determine not just the current state of the property and surrounding area but also factors that can be expected to affect the value of the property and the profitability of any business that is located on that property. This is just one reason why having experienced real estate as well as legal guidance is crucial before you make any commitments.
