What does the concept of "regression" imply in real property appraisal?

The concept of "regression" in real property appraisal refers to the phenomenon where a superior property may lose value due to the presence of lesser-quality properties in its vicinity. This occurs because the value of real estate is influenced by surrounding properties and overall neighborhood conditions. When a high-quality property is located in an area surrounded by lower-quality homes or properties, the overall attractiveness and therefore the market value of the superior property can decrease.

This principle is based on the idea that buyers tend to evaluate real estate not only on the property itself but also on what is in the surrounding area. Hence, if a high-value property is surrounded by properties of significantly lower value, its market position can be negatively impacted, leading to a reduction in its assessment and perceived worth.