Real Estate Council of Alberta Fundamentals Practice Exam

What principle suggests that the added value of certain property features influences overall property value?

1. Principal of Consistent Use

2. Principal of Contribution

3. Principal of Competition

4. Principal of Surplus Productivity

The correct answer is: Principal of Contribution

The principle that suggests the added value of certain property features influences overall property value is the Principle of Contribution. This principle posits that the worth of any particular feature of a property is determined by how much it adds to the overall value of the property compared to its cost. Essentially, if a specific feature enhances the utility, appeal, or marketability of a property and contributes positively to the value, it is considered to have a high contribution. For example, if a home has a swimming pool, the increase in property value attributed to this feature will depend on how much buyers in the market are willing to pay for that pool, relative to its construction and maintenance costs. Features that do not add perceived value or that are not in demand may not contribute positively. Understanding this principle is critical for appraisers and real estate professionals who assess property values, as it helps them identify and quantify the financial impact of property enhancements or features, leading to more accurate assessments.