Property ValuationIntermediateArizona Exam

Regression in real estate valuation refers to:

AA reduction in value when a property is surrounded by lower-value propertiesCorrect

BThe mathematical regression analysis used in mass appraisal

CWhen a property's value increases over time

DA legal action challenging an appraisal

Why A reduction in value when a property is surrounded by lower-value properties Is Correct

Answer A: A reduction in value when a property is surrounded by lower-value properties

The principle of regression states that a higher-value property's value is pulled down by surrounding lower-value properties—the opposite of progression, where lower-value properties benefit from proximity to higher-value ones.

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.

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.

Comparable Sales (Comps)

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

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