Property Valuation
The principle of 'regression' in real estate value states that:
AProperty values always decline in a declining market
BA higher-priced property is pulled down in value when surrounded by lower-priced properties✓ Correct
COlder properties always lose value
DOverimprovement is always beneficial
Explanation
The principle of regression holds that a superior property is negatively affected (pulled down in value) when located among properties of lesser quality or value. This is the mirror opposite of the principle of progression.
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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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
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