Real Estate Math
A North Dakota homeowner adds a garage for $18,000. The appraiser estimates it adds $12,000 in value. What is the principle of contribution for this improvement?
AThe garage is over-improvement; it contributes $12,000✓ Correct
BThe garage adds $18,000 in value
CThe garage has no value since it cost more than it added
DThe garage must be removed
Explanation
The principle of contribution states that the value of an improvement equals what it adds to the property's market value, NOT what it cost. The garage contributes $12,000 even though it cost $18,000.
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