Question

Which of the following situations illustrates the principle of contribution?

1.Because of a decline in mortgage interest rates, a homeowner in a certain market is able to list her house at a higher price.
2.The appraised value of a house goes up by $20,000 over a two-year period because of the prices recently paid for other houses in the neighborhood.
3.A homebuyer makes a down payment of 20% instead of the 10% the lender requires.
4.A homeowner adds a third bathroom to a house and thereby increases the appraised value by $10,00

Answer 1

The principle of contribution is illustrated in situation 4, where a homeowner adds a third bathroom to a house and thereby increases the appraised value by $10,000.

Step-by-step explanation:

The principle of contribution is illustrated in situation 4, where a homeowner adds a third bathroom to a house and thereby increases the appraised value by $10,000. In this case, the additional bathroom contributes to the overall value of the house.

Contribution refers to how a specific improvement or feature adds value to the property as a whole. By adding a third bathroom, the homeowner has increased the functionality and desirability of the house, leading to a higher appraised value.