Define Principle of Progression:

"The principle of progression posits that the value of a lower-priced property can increase due to its location within a neighborhood of higher-priced properties."

Explain Principle of Progression:

Introduction

The principle of progression is a foundational concept in real estate valuation that suggests a higher-valued property will benefit from its association with neighboring properties of greater value. This principle is based on the idea that the value of a property can be positively influenced by its proximity to more valuable and well-maintained properties.

In this article, we'll explore the principle of progression, its significance, how it impacts property valuation, and its role in understanding real estate dynamics.

Understanding the Principle of Progression:

The principle of progression posits that the value of a lower-priced property can increase due to its location within a neighborhood of higher-priced properties. Essentially, the value of a property can be enhanced by its surroundings and the perceived desirability of the neighborhood.

Significance of Progression:

1. Property Valuation: The principle of progression is a crucial factor in determining the fair market value of a property, taking into account the context of the surrounding area.

2. Perceived Value: A property's value is not solely determined by its intrinsic qualities but also by the perceived value of the neighborhood and its amenities.

3. Appraisal Considerations: Appraisers use the principle of progression to adjust property values based on the influence of the surrounding neighborhood.

Application in Property Valuation:

1. Comparative Market Analysis (CMA): Real estate professionals use the principle of progression when conducting a CMA by comparing the subject property with properties in neighborhoods of higher value.

2. Appraisal Process: Appraisers take into account the principle of progression when determining the value of a property by considering how its location contributes to its overall value.

Examples of Progression:

1. Upscale Neighborhoods: A modest house located in a neighborhood of upscale properties may be valued higher than a similar house in a less affluent area.

2. Historic Districts: Properties located in well-preserved historic districts may benefit from the principle of progression as they contribute to the area's overall charm and value.

Challenges and Considerations:

1. Changing Trends: Economic shifts, neighborhood developments, and other changes can impact the validity of the principle of progression over time.

2. Overestimation: Overreliance on the principle of progression can lead to overestimating a property's value if other important factors are not considered.

Conclusion:

The principle of progression underscores the interconnectedness between individual property values and the characteristics of the surrounding neighborhood. While it's an essential consideration in property valuation, it's crucial to remember that other factors, such as property condition, size, features, and market trends, also play a significant role in determining a property's value. Understanding the principle of progression allows real estate professionals, appraisers, and buyers to evaluate properties in a holistic manner and make informed decisions based on the broader dynamics of the real estate market.