What is the principle of contribution based on in real estate valuation?

The principle of contribution in real estate valuation is centered on the idea that the value of a property is affected by how much each particular improvement or feature contributes to the overall value of the property. This principle implies that the value added by an improvement is not necessarily equal to its cost; instead, it is determined by the added benefits it provides in terms of marketability, functionality, and overall desirability based on specific transactions.

Therefore, specific adjustments based on transactions highlight how much value an improvement may add to a property within the context of the local market, considering comparable sales and buyer preferences. This means that improvements or changes must be considered in light of their impact on the property's perceived value due to buyer demand and market analysis, rather than being merely a reflection of cost or original purchase price.

The other options do not fully encapsulate the essence of the principle of contribution. For example, the original purchase price does not consistently reflect current market conditions or property value appreciation. Focusing solely on improvements without considering overall market conditions misses the collaborative effect these changes have with buyer sentiment. Lastly, while general demand affects market value, it does not specify how individual contributions from various property features impact the valuation. Each property is unique, and the contribution principle helps appraisers evaluate