Property Valuation
The principle of 'regression' in real estate valuation states that:
AA higher-value property raises the value of nearby lower-value properties
BA lower-value property tends to pull down the value of a higher-value property in the same neighborhood✓ Correct
CProperty values always decline over time
DImprovements never add value equal to their cost
Explanation
The principle of regression states that a superior property surrounded by inferior properties will see its value negatively affected. The opposite principle—progression—states the reverse.
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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.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
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