Property ValuationIntermediateAlabama Exam

Regression in real estate appraisal means:

AA high-value property is pulled down in value by surrounding lower-value propertiesCorrect

BProperty values decline over time

CA statistical method used to predict future values, as is typical in most transactions

DThe process of adjusting comparable sales

Why A high-value property is pulled down in value by surrounding lower-value properties Is Correct

Answer A: A high-value property is pulled down in value by surrounding lower-value properties

The principle of regression states that a higher-value property is pulled down in value when surrounded by lower-value properties.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

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Key Terms to Know

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Comparable Sales (Comps)

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

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