Anticipation

• In relation to property value, the principle of anticipation applies to the expectations of a future event. Rumors or news of a possible event has the power to increase or lower property values. For example, news of a major employer coming to the area, bringing with it new job opportunities, can increase property values, while news of potential plant shut downs and job losses can lower values.
  
  

Change

• The principle of change applies to the fact that property continually changes. With a house, as each year goes by, the home's value drops in comparison to similar houses in the neighborhood that are brand new. Properties are subject to wear and tear over time, as well as environmental conditions that change the area, such as fire, flood or tornado.
  
  

Competition

• Competition in real estate refers to the basic economic principle of supply and demand. When there are more sellers looking for property than available listings, prices and values tend to increase. With more houses on the market than sellers, prices drop. For example, when a developer overbuilds for available buyers, and properties go into foreclosure, overall property values drop.
  
  

Conformity

• The principle of conformity when applied to real estate values refers to the use of the property and its surroundings. A more valuable property is typically one that conforms and fits in with its surroundings. For example, a house with a tile roof may be out of place in a mountain community where the other homes have shingle roofs, and perceived as less valuable, even though the roof cost more. Yet the same home, if placed in a desert community where most other houses have tile roofs, will be more valuable than one with a shingle roof that doesn't conform.
  
  

Contribution

• The principle of contribution applies to how much value an improvement adds to real estate. While many improvements increase property value, the increase may not be equal to the actual cost of the improvement. An example of this is a swimming pool or wall, which can increase the value of the property, yet typically not enough to cover the price of the improvement. Yet some improvements increase the property's value in excess of the price of the improvement.