Property ValuationIntermediateAlabama Exam

The principle of 'progression' in real estate value states that:

AA lower-priced property benefits (increases in value) when located among higher-priced propertiesCorrect

BA higher-priced property always increases in value over time

CProperty values always progress (increase) in a healthy market, as is typical in most transactions

DNew properties are always valued higher than older ones

Why A lower-priced property benefits (increases in value) when located among higher-priced properties Is Correct

Answer A: A lower-priced property benefits (increases in value) when located among higher-priced properties

The principle of progression holds that the value of a lesser property is positively affected by its proximity to higher-value properties. A modest home in an upscale neighborhood will generally be worth more than the same home in a lesser neighborhood.

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

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.

Depreciation

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

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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