Property ValuationIntermediateArizona Exam

Contribution in appraisal means that the value of any component is measured by:

AThe actual cost incurred to install or construct the improvement, adjusted for any builder's profit and overhead included in the original construction contract
BIts contribution to the overall value of the property, regardless of its costCorrect
CThe current replacement cost of the improvement minus the accumulated physical depreciation calculated using the age-life method for appraisal purposes
DThe relative value of the improvement compared to similar improvements in competing properties within the same market area and price range

Why Its contribution to the overall value of the property, regardless of its cost Is Correct

Answer B: Its contribution to the overall value of the property, regardless of its cost

The principle of contribution states that the value of any component (improvement, feature, or item) is measured by the amount it adds to the total property value, which may be more or less than its cost.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

Key Property Valuation Terms in This Question

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

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