Market evidence supports an adjustment for how additional lot depth changes a site’s overall utility and value. Which principle specifically addresses the value added by that feature to the whole property?
Correct Answer
B) Principle of contribution
The principle of contribution concerns how a feature adds to or detracts from the value of the whole. A market-supported depth adjustment measures the contributory utility of differing depth; it does not assume every extra foot has the same value. No generic table substitutes for evidence applicable to the competitive sites.
Why This Is the Correct Answer
Option B is correct because the principle of contribution holds that a component's value is measured by its contribution to the value of the entire property. Additional lot depth is such a component, and a market-supported adjustment measures its contributory value. It does not assume every additional foot adds the same amount.
Why the Other Options Are Wrong
Option A: Principle of substitution
Option A, the principle of substitution, says a buyer will pay no more than the cost of an equally desirable substitute. It underlies sales comparison but does not specifically measure a feature's added value to the whole.
Option C: Principle of conformity
Option C, the principle of conformity, relates value to how well a property fits with its surroundings. It does not measure the value a single feature adds to the whole property.
Option D: Principle of change
Option D, the principle of change, recognizes that market forces and property conditions shift over time. It does not address the contributory value of a feature like lot depth.
Contribution: what it adds
Contribution asks how much the whole is worth with the feature compared with without it.
How to use: Use this to recognize contribution whenever a question asks what a feature adds to total value.
Exam Tip
When a stem asks about the value a feature adds to or subtracts from the whole property, look for contribution.
Common Mistakes to Avoid
- -Confusing contribution with substitution
- -Assuming each extra foot of depth adds the same value
- -Using a generic depth table without market support
Concept Deep Dive
Analysis
This question tests matching a valuation principle to the idea of a feature's added value. The principle of contribution measures how much a component adds to the whole property's value by its presence, or detracts by its absence. A market-supported depth adjustment applies that idea to lot depth.
Background Knowledge
The principle of contribution applies the principle of balance to property components. It explains why a feature's value is measured by its effect on the whole rather than by its cost. Market evidence, such as paired sales, is used to measure contributory value.
Real-World Application
An appraiser finds paired lot sales in a subdivision showing that deeper lots sell for more, but at a decreasing rate per extra foot. The appraiser uses that evidence to adjust for depth based on its contribution, not a uniform per-foot amount.
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