Property Valuation
What is 'contributory value' versus 'cost' of an improvement in real estate appraisal?
AThey are the same; cost always equals value
BContributory value is what an improvement adds to total property value; it may be more or less than the cost of the improvement depending on market demand✓ Correct
CContributory value is for commercial; cost is for residential
DCost is what was paid; contributory value is the replacement cost
Explanation
The contributory value of an improvement is the amount it adds to the property's total market value—which may differ significantly from its cost. For example, a $50,000 pool may add only $20,000 to a home's value (below cost) in Illinois markets where pools are less desired.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Math Concepts
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