valuation

externalities

Externalities are factors outside a property's boundaries that affect its value, either positively or negatively. Examples include nearby parks, schools, highways, airports, landfills, and changes in the economy. The owner has no control over them. Negative externalities cause external, or economic, obsolescence, which is generally considered incurable because the owner cannot fix a problem located off the property.

Exam tip
Externalities relate to external obsolescence, which is almost always incurable. Watch for clues like a new airport or factory nearby.
Example
After a waste transfer station opens next door, homes on the block lose about 10% of their value due to a negative externality.

Related terms & state variants

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Last verified: 2026-10-23