1. A new highway interchange built next to a residential subdivision lowers home values. This is:
Answer & explanation
Answer: D. Loss in value caused by factors outside the property boundaries is external obsolescence.
valuation
change
An appraisal principle stating that property values are constantly affected by physical, economic, social, and governmental forces. Neighborhoods are often described as going through a life cycle of growth, stability, decline, and revitalization. Because conditions change, an appraisal is valid only as of a specific date.
- Exam tip
- The principle of change explains why appraisals have an effective date and why neighborhoods are described in life-cycle stages.
- Example
- A new highway interchange opens nearby, and values in a quiet residential neighborhood begin shifting as commercial development arrives.
Related terms & state variants
Sources
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Last verified: 2026-10-23