Which principle states that a property’s value decreases when it is not similar to the surrounding properties?

The principle that states a property’s value decreases when it is not similar to the surrounding properties is known as the Principle of Conformity. This principle emphasizes that a property's value is influenced by its match with the characteristics of other properties in the vicinity. When a property does not conform to the standards, expectations, or characteristics of the surrounding area—such as its style, size, design, or functionality—its market value can diminish. This occurs because buyers typically prefer properties that fit into a cohesive neighborhood aesthetic and utility. As a result, homes that stand out negatively from their neighbors tend to suffer a decrease in value due to diminished appeal and desirability.

The other principles mentioned relate to different concepts in real estate valuation. The Principle of Substitution refers to the idea that a buyer will not pay more for a property than they would pay for a similar alternative. The Principle of Contribution evaluates how much a particular improvement contributes to a property's overall value, while the Principle of Highest and Best Use pertains to the most profitable and legal use of a property at its highest value potential. These principles, while important for understanding real estate valuation, do not directly address the impacts of conformity on property value.