Property ValuationIntermediateAlabama Exam

The principle of progression in real estate means that:

AA lower-valued property is pulled up in value by being located near higher-valued propertiesCorrect

BProperty values always increase over time

CLarger properties are always more valuable than smaller ones, subject to the usual exceptions

DA well-maintained property retains its value

Why A lower-valued property is pulled up in value by being located near higher-valued properties Is Correct

Answer A: A lower-valued property is pulled up in value by being located near higher-valued properties

The principle of progression states that a lesser property tends to increase in value due to proximity to higher-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.

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Key Terms to Know

Comparable Sales (Comps)

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

Depreciation

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

Appraisal

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

Capitalization Rate (Cap Rate)

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

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