What is external obsolescence in real estate valuation?

External obsolescence refers specifically to a decrease in property value that arises from external factors outside the property itself. This can include elements such as changes in the neighborhood, economic downturns, environmental issues, or new developments that negatively impact the desirability or functionality of the property. For instance, if a new factory is built nearby that causes pollution, the surrounding properties may experience a decline in value due to the unfavorable conditions created by that external factor.

In contrast, the other options describe different scenarios that do not fit the definition of external obsolescence. Internal renovations focus on changes made within the property that might increase or decrease its value but are not influenced by external conditions. Ownership disputes pertain to legal complexities affecting ownership, which are not external to the property's physical attributes or market position. Finally, market trends could influence value, but if the decline is solely due to factors outside the property, it represents external obsolescence, distinguishing it from general market movements.