Real Estate Council of Alberta Fundamentals Practice Exam

Which principle relates to how specific property attributes add value to the overall property?

1. Principal of Contribution

2. Principal of Surplus Productivity

3. Principal of External Factors

4. Principal of Competition

The correct answer is: Principal of Contribution

The principle that relates to how specific property attributes add value to the overall property is the Principle of Contribution. This principle states that the value of a property is influenced by the specific enhancements or features it possesses. For example, if a property has a swimming pool, a well-maintained garden, or modern renovations, each of these attributes contributes to the overall value of the property. The Principle of Contribution emphasizes that the value added by a specific feature is based on how much that feature enhances the overall appeal or utility of the property, relative to other similar properties in the market. It reflects the idea that not all improvements or features are valued equally; it is the contribution of each feature to the property's overall worth that is significant. In contrast, other principles such as the Principle of Surplus Productivity focus more on the income generation potential of a property, while the Principle of External Factors considers influences external to the physical features of the property, like location or community amenities. The Principle of Competition highlights how property value can be affected by competitive market forces. These principles operate in their own contexts but do not directly address how specific features of a property contribute to its overall value.