Humber/Ontario Real Estate Course 4 Exam Practice

Which principle explains the impact of larger homes on the value of a smaller home in the neighborhood?

1. Highest and best use.

2. Conformity.

3. Progression.

4. Regression.

5. Substitution.

6. Supply and demand.

The correct answer is: Progression.

The principle of progression highlights how the presence of larger or more valuable homes in a neighborhood can positively influence the value of smaller homes. This principle operates under the idea that a smaller home located amongst larger, more expensive homes will typically see an increase in its market value, as buyers often perceive it as part of a desirable area with high-quality housing. The improved value of smaller homes can also be attributed to the attractiveness of the neighborhood, which can lead to higher demand for properties, ultimately enhancing the overall market value. Unlike this principle, conformity refers to homes within a particular neighborhood typically aligning with each other in terms of size and style. The principle of regression, on the other hand, addresses how larger homes might lose value when situated among much smaller homes; this is the inverse of progression. The highest and best use is concerned with determining the most profitable use of a property rather than its relationship to surrounding properties. Lastly, the principles of supply and demand typically capture broader market dynamics and demographic influences rather than specifically addressing the impact of property sizes within a neighborhood. Therefore, progression aptly explains the positive effect that larger homes have on the value of smaller homes within a community.