Question

A man wants to add a swimming pool and spa to his single-family home. He asked an appraiser to determine whether the new improvements would add value to his home. The appraiser would rely on which principle?

Answer 1

Answer:

contribution principle

Explanation:

In real estate, the principle of contribution states the following: The cost of a particular improvement is not necessarily equal to the increase of the property's market value when the improvement is implemented.

Considering the adding of rooms and swimming pools are a common reason why people like the man in the example seek advice from an appraiser. Usually, people think it is always wise to implement such property upgrades having in mind solely the potentially increased resale price.

Appraisers determine if it is feasible to do the improvements, taking into consideration the resale price. They determine it by assessing various factors that change from time to time, and by comparing a particular property with similar properties.