A pool adds $15,000 in one neighborhood but only $5,000 in a colder market two hours away. What principle does this illustrate?
Correct Answer
A) Contribution can vary by market; use subject-market evidence
Contributory value reflects the relevant market’s response. A $15,000 pool indication in one market and $5,000 in another supports testing market-specific applicability, not a universal pool adjustment or a proven causal explanation for the difference.
Why This Is the Correct Answer
Option A is correct because contributory value reflects the reaction of the relevant market, so a pool's contribution can differ from one market to another. Adjustments must reflect the market's reaction to the difference, which calls for evidence from the subject's market.
Why the Other Options Are Wrong
Option B: A pool carries one national value, apart from the local market
Option B says a pool carries one national value apart from the local market. The facts show $15,000 in one market and $5,000 in another, which contradicts a single national value.
Option C: The larger of the two amounts is the more reliable one
Option C says the larger of the two amounts is the more reliable one. Size of an indication does not make it more reliable; the relevant indication is the one from the subject's market.
Option D: Construction cost fixes the market contribution of the pool
Option D says construction cost fixes the pool's market contribution. Cost and contribution can differ, and the two markets here show different contributions for what could be similar pools.
Local market sets the value
A feature is worth what buyers in the subject's market pay for it, not what it is worth somewhere else.
How to use: Use this when an option suggests a fixed national or cost-based value for a feature.
Exam Tip
Answers that tie contribution to the subject's market are usually stronger than ones that claim a fixed or universal amount.
Common Mistakes to Avoid
- -Using an adjustment from another market without testing it
- -Equating construction cost with contributory value
- -Assuming the larger indication is more reliable
Concept Deep Dive
Analysis
This question tests that a feature's contributory value depends on the market. A pool may add more in one area and less in another. The appraiser relies on evidence from the subject's own market rather than a universal figure.
Background Knowledge
The principle of contribution holds that a component's value is measured by what it adds to the whole property. That contribution is set by buyers in a particular market and can vary with climate, price level and preferences. Adjustments must reflect the market's reaction, not a fixed or cost-based amount.
Real-World Application
An appraiser who has seen pools add about $15,000 in one county is assigned a home in a cooler market two hours away. Local paired sales show a much smaller premium, so the appraiser uses the local evidence.
More Sales Comparison Questions
Supported adjustments are: non-market financing $10,000, GLA $36/sf, garage $3,500 per car, pool/spa $12,500. A comparable identical to the 2,800 sf subject sold for $267,000 with non-market financing. What is its adjusted price?
Using GLA $36/sf and non-market financing $10,000: a 3,100 sf comparable sold for $277,000 with non-market financing; the subject has 2,800 sf. Bath count differences are not adjusted. What is the adjusted price?
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