Principles of Value

The appraisal of real estate involves 15 Value Principles that are important to understanding value to property. Lets look at five of them for now.
1. The Principle of Anticipation. This principle states that value is created by the anticipation of benefits or amenities to be attained in the future. Or in other words the present worth of all rights of future benefits. Therefore, the purchase price of a property is based on the present worth of those anticipated future benefits. It is important for the buyer or seller to be informed and to evaluate the listing information for properties with the help of a competent Realtor.
2. The Principle of Balance. This principle states that value is created and maintained in proportion to the equilibrium (balance) attained in the amount and location of essential uses of real estate. With an individual property, the factors of production (labour, coordination, capital and land) must be in proper balance in order to maintain maximum value. Too much or too little of any of these factors tends to reduce value.
3. Principle of Change. This principle states that economic and social forces are constantly at work and that changes caused by these affect property value. The appraiser views real property in a state of change (transition) and observes evidence of trends that my affect the property in the future. The principle of change is fundamentally the law of cause and effect. The value estimate is only valid as of a specific time.
4. Principle of Competition. This principle states that excessive profits will tend to breed competition that in turn has a negative impact on profits. Excess profit breeds ruinous competition.
5. Principle of Conformity. This principle states that land must be utilized to reasonably conform with the existing standards of the area in order to reach it maximum value. Too much conformity breeds monotony and too little breeds disharmony; both are detrimental to value. Zoning regulations protect neighborhoods to inharmonious uses.
These principles are fundamental to understanding how value is imputed to properties.
Cheryl Sebrins| Real Estate Sales Representative

282 Geneva St.
St. Catharines, ON
Office: 905.646.2121
Cell: 289.241.6360

Cheryl Sebrins

Cheryl Sebrins

Sales Representative
CENTURY 21 Today Realty Ltd., Brokerage*
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