California Real Estate Broker ExaminationValuation and AppraisalMedium
An appraiser is valuing a property that is part of a larger subdivision. The appraiser notices that the property's value is negatively affected because it is an exceptionally well-maintained and superior property surrounded by several poorly maintained, inferior properties. This phenomenon is an example of the principle of:
- AProgression
- BConformity
- CRegression
- DSubstitution
Show answer & explanationAnswer & explanation
Correct answer: C. Regression
The Principle of Regression states that the value of a superior property is adversely affected by the presence of an inferior property in the same area. Conversely, Progression is when an inferior property's value is increased by superior properties.
Why the other options are wrong
- A. Progression is the opposite; an inferior property's value is increased by its proximity to superior properties.
- B. Conformity states that maximum value is realized when a property is in harmony with its surroundings, which is not the primary issue here.
- D. Substitution states that the maximum value of a property tends to be set by the cost of acquiring an equally desirable substitute property, which is not the scenario described.
Principle of Regression
The Principle of Regression states that the value of a superior property will be adversely affected by the presence of less desirable or inferior properties in the same area.
- A superior property's value is pulled down.
- Opposite of the Principle of Progression.
- Emphasizes the importance of neighborhood quality.
Memory trick: Regression: The BEST house gets DRAGGED DOWN.