Humber/Ontario Real Estate Course 4 Exam Practice

Which statement accurately identifies the effect of stigmas on property value?

1. Technical risks must be present for stigmas to affect property value.

2. Stigmas can extend the time a property stays on the market.

3. Stigmas are tangible issues that directly decrease property value.

4. Real risks always accompany perceived stigmas in real estate.

The correct answer is: Stigmas can extend the time a property stays on the market.

Stigmas in real estate refer to non-physical factors that can affect a property's marketability and value. They could include associations with a crime, death, or any negative event related to the property or its surroundings. When a property has a stigma, potential buyers may be deterred by the negative connotations associated with it, even if the physical attributes of the property are strong. As a result, this can lead to an extended time on the market because buyers may hesitate or decide against making an offer. The perception created by the stigma may require sellers to adjust their expectations or listing prices, further prolonging the selling process. Other response options reflect misconceptions about stigmas. Technical risks do not need to be present for stigmas to have an impact; a stigma can exist in the absence of any physical or technical issues with the property. Stigmas aren’t always tangible; they often stem from perceptions and can affect market dynamics without being directly linked to physical property conditions. Lastly, while perceived stigmas can certainly influence how a property is viewed, they do not necessarily have to be accompanied by real risks, as the stigma alone can deter potential buyers.