easy · National Real Estate Exam valuation
A homeowner spends $20,000 adding a pool, but the home's value rises by only $8,000.
Which appraisal principle explains why the value increase does not equal the cost?
- The principle of substitution, which compares the cost of an equally desirable alternative.
- The principle of contribution, an improvement's value is what it adds, not what it cost.
- The principle of supply and demand, which measures how many buyers want the home.
- The principle of progression, which raises value when nearby homes are more expensive.
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