What does the Principle of Contribution determine regarding property components?

The Principle of Contribution is a key concept in real estate appraisal which asserts that the value of a particular component of a property is determined by its contribution to the overall value of the property. This principle suggests that each component or feature of the property adds a certain amount of value, but only to the extent that it enhances the total value of the property.

In practical terms, if a property has a new swimming pool, for example, its contribution to the overall value depends on how much more buyers are willing to pay for the property because of that pool. If buyers find value in the pool that contributes significantly to the property's market appeal, then its effect on total property value will be high. Conversely, if the pool does not align with buyer desires or market trends, it may contribute little or nothing to overall property value.

The other options do not capture this concept as directly as the correct answer. Aesthetic appeal, individual cost, and regulatory compliance are factors that may influence valuation but do not directly align with the principle of how each component affects the value of the entire property as determined by buyer perceptions and market conditions.