What principle explains the effect of a change in a property on its overall value?

Prepare for the Alabama Post-License Salesperson Exam. Utilize flashcards and multiple choice questions with hints and explanations. Ensure your success on the exam day.

The principle that explains how a change in a property affects its overall value is known as the principle of contribution. This principle asserts that the value of a property is determined by the contribution of individual features or characteristics to its overall value. For example, if a homeowner adds a swimming pool, the value of the property may increase; however, the increase in value is not necessarily equal to the cost of the pool installation. Instead, it's based on how much value the pool adds to the property compared to similar homes in the area.

This principle underscores the idea that improvements to a property should enhance its market value, but those improvements must be relative to the expectations of buyers and the overall market. The value contribution of an improvement is ultimately assessed by what potential buyers are willing to pay, rather than the cost incurred by the seller to make that improvement.

In contrast, the other principles—such as progression, which refers to the increase in value of a less expensive property due to its proximity to more valuable properties; plottage, which pertains to the increased value that results from combining two or more parcels of land; and regression, which indicates the decrease in value of a more expensive property due to its proximity to less valuable properties—do not directly address the specific

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