What is Contributory Value
Contributory value is the worth or value that a single component or part provides in relation to the total value of the whole.
BREAKING DOWN Contributory Value
Contributory value is most commonly used in the context of real estate, and specifically in relation to property values. In that situation, it refers to the contribution made by a particular feature or component to the overall value of the whole property. This term is often discussed in relation to a renovation or improvement that may be made to the home. This could include a wide range of upgrades or additions, including a garage, a deck, an in-law suite, or a garage. It could also refer to expanding the size of the lot by purchasing adjacent property, or by improving the existing lot through landscaping or clearing more usable space.
The concept of contributory value comes from the field of value theory. In broad, basic terms, that refers to the school of thought examining how people value or appreciate things.
Contributory Value Can Be Subjective
Different features in real estate may have vastly differing contributory values. The contributory value of a backyard deck may be well below that of a secondary suite with a full kitchen. Contributory values may also be dependent on buyer preferences and the state of the economy.
For example, the pool in the backyard may have a contributory value of $10,000 for a family with teenage children, but may have scant contributory value for a family with toddlers. Likewise, enhancements such as granite countertops in the kitchen and state-of-the-art appliances may be a significant contributor to value in a red-hot real estate market, but their contributory value may be diminished in a sluggish housing market.
In some cases, a party or entity may need to calculate the contributory value of a certain portion of the property or land, or a single structure located within the larger piece of property. For example, if an outbuilding is damaged or destroyed, the value may need to be determined in order for insurance proceeds to be determined, or for the new value of the remaining existing property to be determined. In some situations, this may also be discussed in relation to tax assessments, particularly in certain municipalities where certain structures may be viewed separately or differently for tax purposes than the residence or other parts of the property. For example, farms and other structures related to the operation of a farming business sometimes falls into that category.