Physical Property-Specific Factors That Affect Value

Property Value

There are many factors that can affect property value including demand, utility, scarcity, transfer-ability (DUST). Physical characteristics are just as important factors that look at the use and nature of the land, not just the improvements or intangible factors.

Highest and Best Use

When valuing property, highest and best use means to determine the most profitable, legally permitted, feasible, and physically possible use of a property. Of all property-specific factors, this is the most important when determining value.

However, highest and best use is not as important for most homes; such as homes in a neighborhood surrounded by other homes where deed restrictions/zoning only allow housing to be built. In this case, the property is already in its highest and best use.

One example of when it becomes an important factor is when evaluating vacant land or a home that is surrounded by commercial buildings and commercial zoning. In this case, the property would potentially be more valuable if it was put to commercial use.


In regards to location, we’ve all probably heard the term, “location, location, location.” Property in a desirable, prosperous or “up and coming” neighborhoods are typically valued more than other areas. Even property within the same neighborhood could be valued more or less because of it’s location. For example, a property next to the railroad tracks vs a property away from the tracks in a cul-de-sac.

Homes within a neighborhood could benefit from progression or be affected by regression.

Progression: The principle of progression (usually said about the “worst” home in the “best” area) says the value of a home is positively affected by the other homes in the area.

Regression: The principle of regression (usually said about the “best” home in the “worst” area) says the value of a home is negatively affected by the other homes in the area.

Vacant land’s value is also affect by location, zoning, and utilities. Does the land have access to public water when all other nearby properties only have well water?


The theory of substitution says that an informed buyer will not pay more for a property than a comparable substitute. For example, if a property has everything a buyer is looking for but they find a comparable home $10,000 cheaper with different color shutters, they’ll more than likely purchase the comparable substitute property.


Conformity says that a home receives its maximum value when surrounded by like homes in style and function. This can be seen in neighborhoods that set restrictions for mailboxes, types of siding, fences, etc. The primary purpose of the restrictions is to keep conformity in the neighborhood so that all homes can achieve their maximum value.

Chad P. Harris, REALTOR®; Licensed Real Estate Agent.

Leave a Reply

Your email address will not be published. Required fields are marked *