Property Valuation
Which principle of value explains why a house that sells for much more than all other homes in the neighborhood will likely sell for less than its construction cost?
AThe principle of anticipation
BThe principle of regression✓ Correct
CThe principle of contribution
DThe principle of progression
Explanation
The principle of regression states that a higher-valued property is negatively affected by being surrounded by lower-valued properties. If you build a $1M house in a $300K neighborhood, the neighborhood will 'pull down' the subject property's value below its replacement cost.
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