Humber/Ontario Real Estate Course 4 Exam Practice

A small dilapidated house is adjacent to an expensive new home. What effect does this have?

1. It can impact the value of the expensive home negatively.

2. It is an example of a property stigma.

3. It has no tangible impact on the expensive home.

4. It is considered a perceived risk to the expensive home's value.

5. It slightly devalues the new home but not significantly.

6. It has minimal effect due to market demand.

The correct answer is: It can impact the value of the expensive home negatively.

The presence of a small dilapidated house next to an expensive new home can negatively impact the value of the luxurious property. This phenomenon occurs largely due to the principle of "neighborhood influence," which dictates that the quality and condition of surrounding properties play a significant role in determining real estate values. An adjacent run-down property might detract from the overall appeal of the area, potentially leading to a perception that the neighborhood is less desirable. Prospective buyers often consider the surrounding environment when assessing a home's value; if a nearby property is poorly maintained, it can create a negative impression that affects buyers' willingness to pay top dollar for the new home. Additionally, potential concerns about the upkeep of the neighborhood or decreased aesthetic appeal due to the presence of a dilapidated structure can contribute to lower property values. The other options, while they touch upon related concepts, do not directly address the immediate impact on the new home's market value as effectively as the correct answer does. While property stigma and perceived risk can be factors in valuation, they are not the most immediate influences in this scenario. Therefore, recognizing that the presence of the dilapidated house can have a tangible negative effect on the value of the expensive home aligns with established real estate principles regarding neighborhood dynamics.