Texas Property Tax Consultant Practice Exam

What does it mean if an improvement is described as having functional utility?

1. It has depreciation

2. It has a higher market value

3. It represents the highest and best use

4. It is useful and works effectively

The correct answer is: It is useful and works effectively

When an improvement is described as having functional utility, it signifies that the improvement is useful and works effectively for its intended purpose. Functional utility refers to the practical implementation and performance of a property or improvement in meeting its intended functions and serving its users effectively. This concept implies that the design, layout, and amenities of the property contribute positively to its function and usability, making it valuable to current and prospective users. For instance, a commercial building with a layout that facilitates business operations efficiently embodies functional utility. This feature is crucial because improvements that do not meet the needs of their users may face issues with desirability and marketability, potentially affecting their value adversely. Emphasizing functional utility aligns with how properties are evaluated for their worth, based on how well they serve their intended purposes.