Certified Pennsylvania Evaluator Practice Exam

What is the primary focus of the Principle of Anticipation?

1. Current market conditions

2. Future income potential of a property

3. Replacement costs of a property

4. Historical property values

The correct answer is: Future income potential of a property

The Principle of Anticipation primarily centers around the future income potential of a property. This principle asserts that the value of a property is largely determined by its capacity to generate future benefits and income. Investors and appraisers assess properties not purely by their current value but also by projecting the potential earnings they could produce over time. For instance, in real estate appraisal, if a property is expected to increase in rental income or has the potential for appreciating market value due to anticipated development in the area, this future income stream significantly influences its current market value. Understanding this principle is crucial for appraisers and investors alike, as it guides decisions about purchases, investments, and valuations.