The appraisal principle of substitution states that a buyer will pay no more for a property than the cost of acquiring an equally desirable substitute. Which of the following best reflects this principle?
Correct Answer
A) A buyer will pay no more than the cost of an equally desirable substitute property
The principle of substitution holds that a rational buyer will pay no more for a property than the cost of acquiring an equally desirable substitute. This principle is foundational to the sales comparison approach to appraisal, where comparable sales are used to estimate a subject property's value. The other options describe the principles of progression/regression (B), anticipation (C), and contribution (D).
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Related Topics & Key Terms
Related Topics:
Key Terms:
Related Concepts
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
A transfer tax is a tax imposed on the transfer of ownership of real estate.
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
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