Property Valuation
The 'principle of progression' in real estate valuation states that a lower-value property is:
ANegatively affected by proximity to higher-value properties
BPositively affected by being located among higher-value properties — it benefits from their presence✓ Correct
CUnaffected by surrounding property values
DAlways valued at the average of surrounding properties
Explanation
The principle of progression holds that the value of a lower-priced property is enhanced (pulled up) by surrounding higher-value properties. The opposite (principle of regression) applies when a higher-value property is surrounded by lower-value ones.
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Key Terms to Know
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.
AppraisalA 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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