PSI Virginia Real Estate Practice Exam

What principle indicates that the value of a property decreases with reduced perceived value of a site?

1. Principle of Anticipation

2. Principle of Regression

3. Principle of Demand, Supply, and Desire

4. Principle of Balance

The correct answer is: Principle of Regression

The principle that indicates that the value of a property decreases with reduced perceived value of a site is the Principle of Regression. This principle is rooted in the idea that a property’s value is affected by the quality and characteristics of its surrounding properties. When less desirable properties are located nearby, they can lead to a decrease in the overall value of a property. Essentially, if a property is adjacent to lower-valued homes or businesses, its perceived value can decline due to association, regardless of its own qualities or condition. In contrast, the other principles provided highlight different aspects of real estate value. The Principle of Anticipation refers to the idea that a property's value can be influenced by the expected future benefits associated with it. The Principle of Demand, Supply, and Desire focuses on market forces that determine property value based on consumer demand and market supply. The Principle of Balance pertains to the optimal relationship between various elements in a property, such as the proportion of land to improvements. Thus, recognizing how neighboring properties can impact property value helps in understanding the principle of regression and its implications in real estate valuation.