What Is Principle of Contribution?
The principle of contribution holds that the value of any single component or improvement to a property equals the amount it adds to the total property value — not what it cost to install.
Example
A $60,000 swimming pool might contribute only $20,000 to a home's resale value in a market where pools aren't in high demand.
Why it matters
This is the underlying reason renovations rarely recover 100% of their cost — it's the same principle behind cost recovery, superadequacy, and over-improving.
More Commercial & Appraisal Terms
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
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