Under the principle of contribution, a component's value is measured by:
Correct Answer
A) Its effect on the value of the whole property
Why this is correct: The principle of contribution states that the value of a component (like a feature or improvement) is measured by the amount it adds to the total market value of the property, not by its individual cost. This is the basis for making adjustments in the sales comparison approach. Why the other choices are wrong: 'The cost of installing it originally' is the historical cost, which may not equal its contributory value. 'Its physical size relative to the building' is not a measure of value contribution. 'The length of its remaining useful life' is a factor in depreciation, not a direct measure of contribution. Exam tip: Contribution asks: 'How much more will a buyer pay for the whole property because this feature is present?'
Why This Is the Correct Answer
Why this is correct: The principle of contribution states that the value of a component (like a feature or improvement) is measured by the amount it adds to the total market value of the property, not by its individual cost. This is the basis for making adjustments in the sales comparison approach. Why the other choices are wrong: 'The cost of installing it originally' is the historical cost, which may not equal its contributory value. 'Its physical size relative to the building' is not a measure of value contribution. 'The length of its remaining useful life' is a factor in depreciation, not a direct measure of contribution. Exam tip: Contribution asks: 'How much more will a buyer pay for the whole property because this feature is present?'
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