Humber/Ontario Real Estate Course 3 Exam Practice

Which principle of value is a buyer relying on when convinced the smallest house on the street is the best buy?

1. Conformity

2. Progression

3. Regression

4. External Factors

5. Depreciation

6. Anticipation

The correct answer is: Progression

The principle of value that a buyer is relying on when convinced the smallest house on the street is the best buy is progression. This principle suggests that a property's value increases when it is located in an area with higher-valued properties. In this scenario, the buyer sees potential in the smallest house, perhaps due to its location amidst larger, more expensive homes. The perception that the value of the smaller house will rise as it benefits from the higher average property values in the neighborhood reflects the principle of progression. This can be a strong motivator in real estate investment, as buyers often look for opportunities where they can realize increased value over time. Other principles do not apply as directly. For example, conformity relates to properties maintaining similar value due to similar characteristics within a neighborhood, which isn't necessarily the buyer's focus here. Regression would imply the opposite effect, where a high-value area pulls down the value of a lesser property, which again does not align with the buyer's belief. External factors and depreciation involve market conditions and property decline, which aren't relevant to the buyer's optimism about their purchase. Anticipation involves expectations of future benefits, but does not directly tie into the concept of the property's comparative value within the neighborhood context as seen in progression.