Property ValuationIntermediateNorth Carolina Exam

The 'principle of regression' in NC real estate appraisal states that:

AA superior property's value is enhanced by surrounding inferior properties, as a general rule

BA higher-value property's value is reduced by proximity to lower-value, inferior propertiesCorrect

CProperties always depreciate over time

DMarket rents decline in recessions

Why A higher-value property's value is reduced by proximity to lower-value, inferior properties Is Correct

Answer B: A higher-value property's value is reduced by proximity to lower-value, inferior properties

The principle of regression holds that a higher-value property (over-improvement) suffers a decrease in value from proximity to lower-value properties in the 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.

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.

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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