Principle of surplus productivity

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Reference no: EM131503567

1. Seller smith purchased a lot for $150,000 and spent an additional $400,000 on the consrtuction of a new home. One week after moving into the new home, Smith's company transffered him to a major city in a diffeent province. Accordinly, he called a real estate salesperson who estimated the martket value at approximately $475,000 based on several comparable sales in the neighbourhood. While smith does not want to suffer a loss, he realized he can not recover all his costs and decides to take the salesperson's advice and list the property at $495,000.

WHICH OF THE FOLLOWING STATEMENTS BEST DESCRIBES SMITH'S SITUATION?

a. Smith is listing his property fo rless than the value of the property because his personal situation requires him to move without delay.

b. Since the smith PROPERTY IS ALMOST NEW, IT MUST BE WORTH WHAT IT COST to build and SMith should list the property for more than $525,000

c. Smith is choosing a low listing price in the hopes of creating a bidding war and obtaining multiple offers.

d. Smith understands the principle od substitution and relied on the concept of subjective value when choosing the listing price.

2. Delevloper Reed constructs a low-rise condomimium containing twenty-hour suites. Unfortunelty, the site lacks suffieient space for outdoor resident or guest parking, even though the property meets minimum municiple standards. Consequently, Reed was forced to construct underground parking at considerable expense that is now relfected in the asking price for the condominium units. However, while the facility added approximately $28,500 the cost of each unit, the actual increase in market value was only about $12,000.

What priniciple of value best describes this situation?

a. Principle of surplus productivity

b. Prinicple of change

c. Principle of highest and best use

d. Prinicple of contribution

Reference no: EM131503567

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