Certified Pennsylvania Evaluator Practice Exam

Which principle is associated with the Adjustment Technique in property evaluation?

1. Principle of Existence

2. Principle of Highest and Best Use

3. Principle of Contribution

4. Principle of Utility

The correct answer is: Principle of Contribution

The Adjustment Technique in property evaluation focuses on the Principle of Contribution, which emphasizes how individual features or characteristics of a property contribute to its overall market value. This principle is crucial when making adjustments in the valuation process, as it requires an evaluator to assess the impact that specific aspects of a property (such as condition, location, size, or amenities) have on its market appeal and price. When applying the Adjustment Technique, appraisers compare properties and determine how differences contribute to variations in value. For example, if a property features a newly renovated kitchen, the appraiser must evaluate how much that renovation contributes to the overall value in comparison to similar properties without such improvements. This allows for a more accurate assessment of a property's worth based on its unique offerings. In contrast, while the Principle of Existence, Principle of Highest and Best Use, and Principle of Utility are all relevant to property evaluation, they pertain to different aspects. The Principle of Existence focuses on the presence of a property in the market. The Principle of Highest and Best Use relates to the most profitable use of a property, considering zoning and market demand. The Principle of Utility discusses the usefulness of a property to potential users. Each of these principles is important in its own right, but they