Property Valuation
The principle of contribution in appraisal states that:
AThe value of a component is equal to its cost to install
BThe value of a component is measured by the amount it adds to the whole property's value, not by its cost✓ Correct
CAll improvements contribute equally to property value
DThe appraiser must consider all improvements when calculating value
Explanation
The principle of contribution holds that the value of any component of a property is what it adds to the overall value of the whole, regardless of what it cost to install. A $30,000 pool may add only $15,000 to market value if buyers in that market don't value pools highly.
People Also Study
Related Pennsylvania Questions
- Which principle of value states that overimprovement of a property reduces value relative to the investment made?Property Valuation
- An appraisal report in Pennsylvania is typically prepared by a licensed or certified appraiser. The term 'market value' means:Property Valuation
- The 'principle of substitution' underlying appraisal theory states that:Property Valuation
- A Pennsylvania appraiser's assignment conditions for a retrospective appraisal (historical date of value) would use market data from:Property Valuation
Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Comparable Sales (Comps)Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Study This Topic
Practice More Pennsylvania Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Pennsylvania Quiz →