Prices near a planned transit station rise two years before it opens. Which principle explains this?
Correct Answer
A) Anticipation — value reflects expected future benefits
Why this is correct: The principle of anticipation states value is the present worth of future benefits. The market capitalizes the expected benefit of the transit station (reduced commute time, increased access) into prices as soon as the plan is credible, not when it opens. Why the other choices are wrong: "The principle of balance between land and improvements" is incorrect; this concerns optimal improvement size. "Increasing and decreasing returns" is wrong; this deals with investment productivity. "Conformity to surrounding uses" is false; this relates to property similarity. Exam tip: Anticipation drives the income approach. Future benefits are discounted to present value.
Why This Is the Correct Answer
Why this is correct: The principle of anticipation states value is the present worth of future benefits. The market capitalizes the expected benefit of the transit station (reduced commute time, increased access) into prices as soon as the plan is credible, not when it opens. Why the other choices are wrong: "The principle of balance between land and improvements" is incorrect; this concerns optimal improvement size. "Increasing and decreasing returns" is wrong; this deals with investment productivity. "Conformity to surrounding uses" is false; this relates to property similarity. Exam tip: Anticipation drives the income approach. Future benefits are discounted to present value.
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