SAEE - Core Valuation Principles Questions and Answers Flashcards
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Read the first 7 SAEE - Core Valuation Principles Questions and Answers flashcards as text
Which valuation principle states that the value of a property is influenced by the expectation of future benefits?
Answer: Principle of Anticipation
The principle of anticipation holds that value is created by the expectation of future benefits such as income or amenities.
An appraiser finds that adding a fourth bedroom to a three-bedroom home increases its value by only $5,000, while each of the first three bedrooms added far more. This illustrates the principle of:
Answer: Diminishing Marginal Returns
Diminishing marginal returns means each additional unit of improvement contributes less to overall value than the previous unit.
The principle of conformity suggests that maximum value is achieved when:
Answer: Land uses and property types are compatible within the neighborhood
Conformity states that properties achieve maximum value when they are reasonably similar to and compatible with surrounding properties.
Under the principle of contribution, the value of a swimming pool in a property is best measured by:
Answer: The amount it adds to the market value of the property
Contribution measures value by the amount a component adds to total property value, not by its cost to install.
A vacant lot sits between two fully developed commercial parcels. The lot's value increases significantly due to its potential for assembly with the adjacent parcels. This is an example of:
Answer: Plottage value
Plottage refers to the increment of value created by combining two or more parcels into a single, larger, more valuable site.
Which principle explains why a well-maintained home in a declining neighborhood may sell for less than its cost to build?
Answer: Principle of Regression
Regression states that the value of a superior property is pulled down by the presence of inferior surrounding properties.
The economic principle that links supply and demand to value is best described as:
Answer: When demand exceeds supply, prices tend to rise
Basic market economics dictate that when demand exceeds supply, competition among buyers drives prices upward.