How is the value of a component in a property assessed according to the principle of contribution?

The principle of contribution states that the value of a component or feature of a property is determined by the extent to which it adds to the overall value of that property, rather than based solely on its individual market price, historical significance, or replacement cost.

In other words, a component is valued based on how much it enhances the total property value when considering such factors as functional utility, aesthetic appeal, and alignment with buyer preferences. For example, an upgraded kitchen in a home may contribute significantly to the overall market appeal and thus raise the property’s value, but if that upgrade does not resonate with potential buyers, its contribution may be minimal.

This approach helps appraisers to assess how individual elements of a property work synergistically to affect overall value, ensuring that the appraisal reflects a comprehensive understanding of both the property as a whole and its individual components.