Contributory Value

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Contributory Value

In real estate, a portion of the land or the improvements on it that increases its value. For example, the contributory value of the mother-in-law suite in a back yard may increase the value of a home by $25,000.
References in periodicals archive ?
The resolution of the apparent dilemma requires consideration of the interrelationship between the value of the whole package (based on market rent to the whole) and the contributory values of component parts (including site rent and an allocation for improvement rent).
The value of the total real property is a function of the contributory values of the components.
After deduction of the contributory value of the structures, there would not be any leasehold estate value if the site rent were at the market rent.
Therefore, the contributory value of the leasehold interest in the permitted site comes to $20,500 ($104,000 $83,500), and the total property value is $ 135,500, rounded (120).
While there is little, if any, business enterprise value in the comparatives, the leasehold interest value exceeded the contributory value of the structure.
As a result of these dynamics, appraisers and originators are likely to be extremely conservative with contributory values for legal ADUs, to the point where the accuracy of valuations may be compromised.
One benefit of the income capitalization approach is it clearly assigns contributory values to each unit.
For example, one permitted ADU in Portland had estimates of contributory value that ranged from $10,000 to $100,000.
The case of a legal ADU, where an owner can receive market rent and contributory value might be estimated with the income capitalization approach, is barely addressed.
While the guidelines of government-sponsored enterprises might make it simpler to presume that a legal ADU's contributory value is incidental or insignificant, that is not likely to be an accurate assumption.
Nevertheless buyers (and by implication, the appraisers working for their lenders) seemed to be finding some value in accessory dwellings, since in every case in the study, the actual sale price was more than the contributory value (via the income capitalization approach) of the primary dwelling.