Principals of Value

Question 1

What is anticipation?

Answer 1

The benefits a buyer expects to receive over the period of time they have the property influences the decision to purchase it

Question 2

What is assemblage?

Answer 2

When 2 adjacent pieces of property are joined together, the value of the one larger parcel may be greater than the value of the two separately

Question 3

What is change

Answer 3

Both market conditions and a property’s physical condition change constantly over time. They affect the benefits of the property

Question 4

What is conformity

Answer 4

This principal says that a property is at tis highest value when it conforms with and fits into its surroundings

Question 5

What is competition?

Answer 5

When several businesses of a similar type are close to one another, together they make more money than they would have alone

Question 6

What is contribution?

Answer 6

This is what the market recognizes as the change in value of an improvement made to a property, rather than what that improvements actually cost. A remodeled kitchen might add 50k to the value of a home, while the actual cost could have been anywhere from 25k-75k

Question 7

What is diminishing return?

Answer 7

This condition is a result of continuing to add improvements to a property when those improvements will have no effect on increasing the value of the property

Question 8

What is highest and best use?

Answer 8

Every property has a single-use which produces the greatest income and return. Therefore the property will have its highest value when it is used for that single purpose

Question 9

What is progression?

Answer 9

A property is affected by the surrounding properties. The value of the “smallest house on the block” will tend to increase if the other homes on the street have more value

Question 10

What is regression?

Answer 10

The value of the “largest home on the block” may decrease if the other homes on the street are much lower in value

Question 11

What is substitution?

Answer 11

A buyer will not pay more for a home than what they would pay for another home that is equally attractive and available

Question 12

What 4 things does the value of a property depend on?

Answer 12

How many properties are available in an area, property prices, number of buyers, and price buyers are willing to pay