principle of residential appraisal

Principle of Increasing and Decreasing Returns

Don't over-improve a property.

Principle of Change

Holds that it is the future, not the past, which is of prime importance in estimating value. Change is largely the result of cause and effect.

Principle of Competition

Increased competition results in decreased profits for current providers

Principle of Regression

Lower valued properties in the neighborhood lead to a decline in value of a subject property

Principle of Conformity

Maximum value is found when there is a reasonable degree of similarity or homogeneity

Principle of Balance

Mixed land use should result in maximum value for all properties involved (master planned communities demonstrate this principle)

Principle of Substitution

No person is justified in paying more for a property when a similar property can be purchased for less - sets an upper limit on price

Highest and Best Use

The possible use of a property that would produce the greatest net income and thereby develop the highest value.

Principle of Contribution

The value of any component of property is determined by how much value the improvement contributes to the value of the whole property.

Principle of Supply and Demand

Value is affected by scarcity of a product and the desire for that item.

Principle of Anticipation

purchase price is affected by the expectation of future appeal and benefits

Principle of Progression

subject property value is increased by surrounding properties