Which factor commonly leads to external obsolescence?

External obsolescence refers to a reduction in property value caused by external factors outside the property itself. Neighborhood decline or changes in zoning are prime examples of this phenomenon. These changes can negatively impact an area's desirability or utility, leading to a decrease in property values.

For instance, if a neighborhood begins to experience a decline—due to factors like increased crime rates, the closure of local businesses, or deterioration of surrounding properties—the properties within that area may also see their value diminish, regardless of their own condition or improvements. Additionally, changes in zoning can alter permissible uses of land in a way that negatively affects nearby properties; for example, if a residential area is rezoned for commercial use, it can lead to noise, traffic, and other disruptive changes that make the residential properties less desirable.

The other options, while they can affect property value, do not directly represent external obsolescence. Increased wear and tear and reduced property size relate more to physical depreciation or functional obsolescence rather than external factors. Interior renovations typically enhance a property’s appeal and value, rather than detract from it. Hence, neighborhood decline or changes in zoning is the most accurate answer regarding external obsolescence.