Humber/Ontario Real Estate Course 4 Exam Practice

If a seller's home is listed at a high price but sells for significantly less due to neighborhood factors, which principle of value is at work?

1. Progression

2. Conformity

3. External Factors

4. Regression

5. Homogeneity

6. Functional Obsolescence

The correct answer is: Regression

The principle of value that is at work in this scenario is regression, which refers to the concept that the value of a property can decrease due to its proximity to less valuable properties. In this case, the seller's home is listed at a high price, but due to unfavorable neighborhood factors, it sells for significantly less. This misalignment between listing price and sale price illustrates regression, where the value of a home diminishes because it is surrounded by lower-valued properties or less desirable conditions in the area. This principle highlights the impact that external factors have on property values. While other choices mention principles like progression or conformity, these scenarios typically present situations where values increase in relation to surrounding properties or adhere to a certain standard. However, regression distinctly identifies how a property's value is adversely affected by external influences in the neighborhood, demonstrating the importance of understanding local market conditions when assessing property value.