Principles That Affect Value

¨ Cost

· amount spent to buy or build

· history – not today’s value

¨ Price

· amount presently being asked

· may or may not be reasonable

· may or may not reflect market

· determined by seller

¨ Market Value

· estimate of benefit of ownership

· most probable selling price

· determined by buyers

¨ Regression

· owner over-improves for neighborhood

· most expensive home in area

· won’t sell beyond top of area price range

¨ Progression

· lowest priced home in area

· quickest to appreciate

· higher priced homes pull up value

¨ Substitution

· sets upper limit of value

· buyer won’t pay more than cost of acquiring elsewhere

¨ Contribution

· value decreases as number increases

· as with substitution, varies by marketplace and buyer demand