Property ValuationIntermediateCalifornia Exam

The principle of progression in real estate means:

AProperty values always increase over time, per standard California valuation practice

BA lower-value property benefits from being surrounded by higher-value propertiesCorrect

CImprovements to a property always increase its value, under standard appraisal methodology

DA property's value increases with each renovation, as typically applied in a comparative market analysis

Why A lower-value property benefits from being surrounded by higher-value properties Is Correct

Answer B: A lower-value property benefits from being surrounded by higher-value properties

The principle of progression holds that a lower-value property's worth is enhanced by its proximity to higher-value properties. (The opposite is regression — a higher-value property diminished by nearby 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

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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