A market area contains $400K starter homes and one $1.2M custom estate. What appraisal problem does the estate face?

Correct Answer

C) Its market area must be drawn wider than the neighborhood, with weaker comparables

Why this is correct: The principle of regression states an over-improved property suffers a value penalty relative to its neighborhood. For a $1.2M estate in a $400K area, its true comparables and competing buyers are found in a wider geographic market, making location evidence weaker and requiring a broader market area analysis. Why the other choices are wrong: "It automatically gains value from the contrast" is incorrect; progression benefits an under-improved property, not an over-improved one. "It establishes a brand-new, higher price band" is false; one property does not reset the entire area's price level. "It cannot be appraised at all" is wrong; it can be appraised, but the analysis is more complex. Exam tip: Over-improvement = regression. Look for comparables outside the immediate neighborhood.