Change, contribution, plottage, and substitution are some of the basic principles that affect what aspect of real estate? determine cost. estimate value.
What is principle of substitution in real estate?
The principle of substitution states that the upper limit of value tends to be set by the cost of acquiring an equally desirable substitute, assuming no untimely delays. A prudent investor would pay no more for an income-producing property than it would cost to build or purchase a similar property.
Which appraisal approach uses the principles of substitution and contribution?
Broker’s comparative market analysis
It is based on the principle of substitution– that a buyer will pay no more for the subject property than would be sufficient to purchase a comparable property– and contribution– that specific characteristics add value to a property.
When a component part of a property is valued in proportion to its contribution to the value of the whole it is referred to as this principle?
Contributory value refers to the amount by which a single component of an asset influences its total value. Contributory value is commonly used in the real estate industry to illustrate how just one property feature impacts the value of the entire property.
Which appraisal approach depends on the principle of substitution?
Like the cost approach, the sales comparison approach is based on the principle of substitution. This principle presumes that a prudent buyer will pay no more for a property than the purchase price of a similar and equally desirable property.
What is the meaning of principle of substitution?
Definition: an economic law of value; no prudent buyer will pay more for a property than the cost of an equally desirable replacement property.
What does regression mean in real estate?
The principle of regression is a term used by real estate appraisers stating that the value of high-end real estate may be diminished by having lower-end properties in the same vicinity. This principle is used frequently in writing zoning laws, which strive to keep business and residential areas separate.
What is the principle of progression?
Principle of progression is the idea that the value of a house increases when more valuable houses are built in the area. This contrasts with principle of regression, which is based on the concept that larger, more expensive houses lose value when they are near smaller, less valuable homes.
What are the four criteria for highest and best use?
The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.
What is the principle of highest and best use?
Highest and Best Use, Defined
The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, and financially feasible and that results in the highest value.
Which principle of value holds that a property?
The Principle of Substitution is the basis for the market data approach to appraisal. This principle says that the maximum value of a property usually is established by the cost of acquiring an equivalent substitute property that has the same use, design, and income.
What principle holds that a property is affected by the surrounding properties?
The principle of progression states that the value of less expensive properties will increase when more expensive properties come into the area. Thus, if your home is worth $500,000 and it is surrounded by $1,000,000 homes, the value of your property will go up.
What is the first principle of appraising real property?
The principle of substitution is the most basic principle of appraisal as it is used in each of the three approaches to value. The principle of anticipation: The principle of anticipation concerns how a property will benefit the owner over time and into the future.
Which aspect of depreciation is almost always incurable?
Chp 7 Unit 9
|Which aspect of depreciation is almost always incurable?||Economic obsolescence|
|A CMA is performed when:||Pricing property.|
|Which of the following is an example of economic obsolescence?||A house abutting a closed factory.|
|Functional obsolescence is due to:||Poor design or floor plan.|
What the market recognizes as the change in value an improvement makes to a property is called what?
What the market recognizes as “the change in value an improvement makes to a property” is called what? … Insured value.
What are the four factors that influence value?
The current and future importance consumers place on the four factors of value (Desire, Utility, Scarcity, and Effective Purchasing Power) represents Demand and Supply of the product or service.