Washington State Real Estate Practice Exam 2026 – Complete Preparation Guide

The correct term used to describe an increase in property value due to improvements or changes in the market is appreciation. Appreciation occurs when a property becomes more valuable over time, which can result from various factors such as renovations, upgrades, or an overall increase in market demand for real estate in a particular area. This is a crucial concept in real estate, as it reflects the potential for investment growth and profitability.

Factors contributing to appreciation can include economic development in the area, enhancements to the property itself, or general trends in the housing market that shift buyer demand. When a property appreciates, the owner's equity in the property also increases, creating opportunities for refinancing or selling the property at a profit.

Other terms, while related to property value, capture different concepts. For example, depreciation refers to a decrease in property value, usually due to wear and tear or unfavorable market conditions. Equity represents the owner's financial interest in the property, calculated as the current market value minus any outstanding debt. Inflation, on the other hand, refers to the overall increase in prices in the economy, which can influence property values but is not a direct measure of property value increase like appreciation is.