Wisconsin Real Estate Sales Practice Exam

When smaller properties in poor condition lower the value of a larger property, this is known as:

1. Progression

2. Regression

3. Depreciation

4. Obsolescence

The correct answer is: Regression

The scenario described involves smaller properties that are in poor condition negatively influencing the value of a larger property. This situation is referred to as regression. Regression occurs in real estate appraisal when the value of a more expensive or larger property is negatively affected by the presence of lower-valued, less desirable properties nearby. Essentially, if a large home is situated in a neighborhood filled with smaller, poorly maintained houses, its value may decline because the overall appeal and desirability of the area suffer. This concept is rooted in the principle that similar properties in proximity tend to have a mutual influence on each other's values. To further clarify the context: progression, on the other hand, is the opposite effect, where lower-value properties enhance the value of a higher-value property. Depreciation refers to a reduction in the value of a property over time due to wear and tear, obsolescence, or market changes. Obsolescence typically involves a property becoming less desirable due to external factors or changes in the market or technology. Thus, while all these terms relate to property value dynamics, regression accurately captures the specific phenomenon where smaller, poorer-quality properties detract from the value of a larger property.