What is the "principle of demand" in real property appraisal?

The principle of demand in real property appraisal refers to the idea that buyers are willing to pay higher prices for properties located in areas where demand is strong. This concept is rooted in economic theory, where the interaction of supply and demand determines market value. In high-demand areas, factors such as location, amenities, and desirability increase buyer interest, leading to competitive bidding and potentially higher sale prices.

Understanding this principle is crucial for appraisers as it informs how market conditions affect property values. Areas with high demand often see properties appreciating in value more rapidly than those in lower-demand regions, thus impacting the appraisal process.

The other options do not accurately reflect the principle of demand. The idea that properties must be actively marketed relates to the marketing aspect rather than demand itself. The belief about larger properties always being in greater demand overlooks variations based on location and market trends. Lastly, stating that property values are solely based on aesthetics simplifies the complex interplay of factors influencing demand and ignores the critical role of location and market dynamics.