Which appraisal principle focuses on the characteristics of surrounding properties affecting value?

The principle that focuses on the characteristics of surrounding properties affecting value is known as regression. This principle refers to the phenomenon where the value of a property is negatively impacted by the presence of lower-value properties in its vicinity. Essentially, if a more valuable property is surrounded by less desirable or lower-value properties, its value may decrease as it can be influenced by those surrounding characteristics.

In real estate appraisal, understanding regression is crucial because appraisers must consider how neighborhood properties can impact the value of a subject property, especially in areas where property values vary significantly. This principle underscores the importance of location and surrounding property characteristics in the valuation process, helping appraisers make more accurate assessments based on context and comparable properties in an area.

The other principles mentioned have different focal points. For instance, disaggregation pertains to breaking down a property into its various components for analysis. Progression involves how a less valuable property may increase in value due to its proximity to more valuable properties. Balance considers the relationship between the various elements contributing to a property's highest and best use but does not directly focus on surrounding property characteristics as regression does.