A luxury waterfront property sold for $2.8 million, but a similar property without water access sold for $1.9 million. Both properties are identical except for the waterfront feature. What is the contributory value of the waterfront access?

Q: What is the correct answer to: A luxury waterfront property sold for $2.8 million, but a similar property without water access sold for $1.9 million. Both properties are identical except for the waterfront feature. What is the contributory value of the waterfront access?

The correct answer is Cannot be determined without additional comparables. Professional appraisal standards require multiple comparable sales to establish reliable contributory value. A single comparison cannot account for other variables that may affect pricing differences, such as location nuances, property condition, timing of sales, or market conditions. The $900,000 difference is merely suggestive but insufficient evidence to definitively establish the waterfront feature's contributory value without additional supporting data from similar property pairs.

Q: What background knowledge is needed for this Property Valuation question?

Contributory value analysis requires understanding how specific property features impact overall value. Under CUSPAP and provincial regulations, appraisers must use the sales comparison approach with multiple comparable properties to isolate feature values. The principle of substitution suggests buyers won't pay more for a feature than the cost of acquiring a similar property with that feature. However, market data must be sufficient to support conclusions. Single comparisons are inadequate because they cannot control for timing differences, condition variations, or other market factors that influence pricing beyond the specific feature being analyzed.

Q: What is a good way to remember the answer to this Property Valuation question?

Remember 'Multiple Matters' - contributory value requires multiple comparables, not just one pair. Think 'One is None' when establishing feature values in appraisal. When you see contributory value questions, immediately ask: 'Do I have MULTIPLE comparables?' If the question only provides one or two data points, the answer is likely 'cannot be determined' or 'insufficient data.'

Q: What exam tip applies to this Property Valuation question?

Always look for questions asking about contributory value - professional standards require multiple comparables, never rely on single property comparisons.

Q: How does this Property Valuation concept apply in real world practice?

A real estate agent lists a lakefront cottage and wants to justify the premium pricing to potential buyers. The seller points to one recent waterfront sale as proof of value. However, the agent knows that mortgage lenders and appraisers will require multiple comparable waterfront sales from recent months to support the valuation. Without sufficient comparables, the property might appraise below the asking price, potentially killing deals or forcing price reductions.

Question

Property ValuationContributory Value AnalysisHARD

A luxury waterfront property sold for $2.8 million, but a similar property without water access sold for $1.9 million. Both properties are identical except for the waterfront feature. What is the contributory value of the waterfront access?

Answer Options

A

$800,000

B

$900,000

C

$1,000,000

D

Cannot be determined without additional comparables