Which appraisal principle explains the increase in Tim and Sue's home's value due to surrounding higher-value homes?

The principle of progression explains how the value of a property can increase when it is located in a neighborhood with higher-value homes. This is based on the idea that the overall desirability and appeal of the area contribute to the enhancement of property values. In this scenario, Tim and Sue’s home benefits from being surrounded by more expensive homes, which raises its market value due to the perception of increased status and desirability that comes from the neighborhood’s overall quality.

Understanding this principle is crucial in real estate as it highlights how external factors, such as surrounding properties and neighborhood dynamics, can significantly impact an individual property's value. This principle is often observed in well-established neighborhoods where the presence of higher-end homes can uplift the value of surrounding properties, encouraging potential buyers to view the area as more desirable overall.