PSI Virginia Real Estate Practice Exam

Which principle states that a property's value increases due to the perceived value of its location?

1. Principle of Regression

2. Principle of Progression

3. Principle of Substitution

4. Principle of Demand, Supply, and Desire

The correct answer is: Principle of Progression

The principle that states a property's value increases due to the perceived value of its location is known as the Principle of Progression. This principle suggests that the value of a property will increase when it is located among higher-valued properties or in a desirable neighborhood. Essentially, when a property is situated in a location that is perceived positively by buyers—due to factors such as amenities, schools, and overall desirability—the property's market value tends to rise. This concept is particularly relevant in real estate, as neighborhoods can significantly influence the market performance of individual properties. For example, if lower-valued homes are located in a neighborhood experiencing development and growth, the value of these homes can increase simply because they are now surrounded by more expensive properties. The other principles mentioned, such as Regression, Substitution, and Demand, Supply, and Desire, address different aspects of property valuation and market behavior, but they do not specifically highlight the influence of location on a property's increased value the way the Principle of Progression does.