Verified market evidence shows buyers pay for a credible planned transit station’s expected access benefits before it opens. Which principle describes valuing those expected future benefits now?
Correct Answer
A) Anticipation — value reflects expected future benefits
When reliable market evidence attributes a price effect to expected future access benefits, anticipation explains that present value can reflect future utility before completion. Analyze probability, timing, costs and adverse effects; a plan alone does not guarantee a premium.
Why This Is the Correct Answer
Option A is correct because anticipation holds that value is the present worth of expected future benefits. When reliable market evidence shows buyers paying for the station's expected access before it opens, that is anticipation at work.
Why the Other Options Are Wrong
Option B: The principle of balance between land and improvements
Option B, the principle of balance between land and improvements, is wrong because balance concerns the right mix of property components, not paying now for future benefits.
Option C: Increasing and decreasing returns
Option C, increasing and decreasing returns, is wrong because that principle concerns how added investment in a property raises value at a rising and then falling rate, not expectations about a future public project.
Option D: Conformity to surrounding uses
Option D, conformity to surrounding uses, is wrong because conformity concerns how value is supported when a property is reasonably similar to its surroundings, not future benefits.
Pay today for tomorrow
Anticipation means today's price reflects benefits buyers expect to receive in the future.
How to use: Use this phrase when a question involves value effects from future events or income.
Exam Tip
Words like expected, future or planned in the stem usually point to anticipation; still confirm the other options describe different principles.
Common Mistakes to Avoid
- -Assuming a planned project automatically adds value
- -Confusing anticipation with conformity
- -Ignoring timing and risk of the future benefit
Concept Deep Dive
Analysis
This question tests the principle of anticipation. Buyers paying now for the expected access benefits of a credible future transit station is a direct example of present value reflecting expected future benefits. The other principles address different relationships.
Background Knowledge
Market value reflects buyers' and sellers' calculations of the future benefits a property will provide. Anticipated public improvements can affect value before completion, but the appraiser must analyze probability, timing, costs and possible adverse effects. A plan alone does not ensure a price premium.
Real-World Application
A rail line is funded and under construction, and nearby condos are selling at higher prices than similar units farther away. The appraiser documents the paired sales and notes the risk that delays or noise could reduce the premium.
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