California Real Estate Broker Exam 2025 – 400 Free Practice Questions to Pass the Exam

Functional utility in real estate valuation refers to the design features of a property that successfully meet market demand and fulfill the needs of its intended use. This concept focuses on how practical and effective a property is for its users, which can significantly influence its value. Properties that exhibit strong functional utility tend to attract buyers or tenants because they align well with what the market is looking for—such as layout, room size, and overall design.

While market trends, age and condition, and neighborhood appeal are all important factors in determining property value, they do not specifically address how well the property functions in meeting the needs of its occupants. For instance, a home designed with efficient use of space and modern amenities would be deemed to have high functional utility, leading to greater desirability and potentially higher valuation. Thus, the correct interpretation of functional utility is indeed about the design features that cater to market requirements.