Which principle helps explain the impacts of external factors on land value?

The principle that explains the impacts of external factors on land value is the Principle of External Factors. This principle recognizes that various external influences—such as economic conditions, zoning laws, environmental aspects, and infrastructure developments—can significantly affect the desirability and, consequently, the value of a piece of land.

For example, if a new highway is constructed near a parcel of land, it can increase accessibility and thus make the land more attractive for commercial purposes, leading to an increase in its value. Conversely, negative external factors, such as the establishment of a landfill nearby, might diminish the land's value. This principle is key for understanding how external conditions interact with real estate market dynamics and affect land value.

In contrast, the other principles like Competition, Highest and Best Use, and Progression explore different aspects of real estate valuation. The Principle of Competition focuses on how similar properties compete within a market, while the Highest and Best Use principle is concerned with maximizing the land's potential based on its most productive use. The Principle of Progression indicates how the value of a less valuable property can increase when located among higher-valued properties. None of these directly address the impact of external factors in the same way as the Principle of External Factors.