Humber/Ontario Real Estate Course 3 Exam Practice

What impact do larger neighboring homes have on a smaller property’s value?

1. Regression

2. Specification

3. Progression

4. Conformity

5. Highest and best use

6. Depreciation

The correct answer is: Progression

Larger neighboring homes can significantly elevate the value of a smaller property through a concept referred to as progression. This principle suggests that properties of lesser value benefit from their proximity to more valuable properties. When a smaller home is situated near larger, more expensive homes, it often attracts buyers who may be willing to pay more than they would if the smaller home were in an area with uniformly lower property values. The underlying reasoning is that the presence of higher-value homes can enhance the perceived desirability of the neighborhood, thereby positively influencing the smaller home's worth. In contrast to the effects of regression, where a larger home might lose value due to being in a neighborhood of smaller, less desirable properties, progression posits that the smaller property can improve in value based on successful comparables. This is particularly relevant in real estate markets where location plays a crucial role in determining home values. The concept of conformity also relates to how properties tend to gain value when they conform to the general market standards of their neighborhood, but progression specifically emphasizes the positive influence of larger or more valuable homes.