The correct answer is C. External obsolescence—also called economic obsolescence—is a loss in value caused by influences outside the subject property ' s boundaries.

A neighborhood containing numerous abandoned buildings can reduce market demand and negatively affect the value of otherwise well-maintained nearby properties. The subject owner ordinarily cannot cure the external condition independently.

Massachusetts Appellate Tax Board materials describe economic or external obsolescence as depreciation attributable to factors external to the property that adversely affect fair market value.

Worn carpeting and a leaking faucet are examples of physical deterioration. An outdated kitchen arrangement is more properly classified as functional obsolescence because the deficiency exists within the subject property ' s design or utility.

This distinction is particularly important in the cost approach because accrued depreciation can include physical deterioration, functional obsolescence, and external/economic obsolescence. Massachusetts assessment guidance expressly recognizes all three categories.

Study Guide Reference: Property Valuation and Appraisal — Depreciation and External/Economic Obsolescence.