California Real Estate Practice Exam

In the appraising of real estate, there are several "principles of value." Of the following, which most clearly describes the "Principle of Change"?

1. Less desirable properties enhance the values of more desirable properties

2. More desirable properties are adversely affected by less desirable properties in their midst

3. None of the above

4. Tomorrow evolves out of today which came out of yesterday

The correct answer is: Less desirable properties enhance the values of more desirable properties

The Principle of Change in real estate appraisal refers to the idea that the value of property is not static but subject to constant change due to various factors such as economic conditions, social trends, or environmental influences. The principle emphasizes that real estate values evolve over time, influenced by external factors and societal shifts. In this context, the correct choice, which suggests that less desirable properties can enhance the values of more desirable properties, aligns with how changes in the surrounding environment and market can impact property values. For instance, if a previously less desirable neighborhood undergoes revitalization or development, it can lead to increased interest in the area, ultimately raising the value of more desirable properties nearby. This concept highlights the interconnectedness of property values in a particular area, where changes can have ripple effects that influence market perceptions and valuations.