The Principle of External Factors explains that:

The Principle of External Factors emphasizes that elements outside of a property can have a substantial impact on its value. This concept recognizes that a variety of external influences, such as the neighborhood, local amenities, schools, traffic patterns, and even economic conditions, can either enhance or detract from the value of a property. For instance, a well-maintained park nearby might increase property values in the area, while the presence of a noisy highway could have the opposite effect.

By acknowledging the significant role these external factors play, real estate professionals can better assess property values and make more informed recommendations to their clients. This understanding is crucial for both appraisals and when advising buyers or sellers in the market. Recognizing that property value is not solely dictated by the physical condition of the property itself, but also by surrounding elements, is key to effective real estate practice.