The principle of value that says improvement to a property is worth only what it adds to the property's market value, regardless of actual cost, is called the principle of

• A. Replacement cost
• B. Contribution
• C. Scarcity
• D. Substitution

Answer: (B)

The principle being tested is that improvements influence value only to the extent they actually add to the property's market value, not by how much they cost to install. This idea is about contribution: the value an upgrade contributes to the property is measured by what buyers are willing to pay for that feature, not by the owner's expense. For example, a fancy kitchen remodel might cost 25,000 but only add 18,000 in market value, so the contribution is the 18,000 that the improvement adds to the sale price, not its 25,000 cost.

Other concepts describe different ideas you may hear in appraisals: replacement cost is the expense to rebuild the structure with a similar quality, not how much value an improvement adds; scarcity relates to how rare or abundant supply affects value; substitution is the idea that buyers compare the property to similar options and choose the best value. The contribution principle specifically explains how improvements translate into added value, which is why it’s the correct choice.