According to the Principle of Contribution, value is determined by...

• A. Cost to build
• B. Mortgage payments
• C. Contribution to value rather than cost
• D. Replacement cost

Answer: (C)

The Principle of Contribution says value is determined by how much a component adds to the property's overall value, not by how much it costs to build. In appraisal, each feature is evaluated by the incremental value it brings to the market—if a kitchen upgrade or addition raises the sale price more than its cost, it has strong contribution; if it costs more than the value it adds, its contribution is weaker. This shows why value isn’t tied to the construction or replacement cost or to financing factors. Replacement cost looks at how much it would cost to reproduce the property, and mortgage payments reflect financing, not the property's market value. So the element that best explains value is its contribution to value rather than its cost.