Property Valuation
The principle of substitution states that:
AOne property can be substituted for another in a 1031 exchange
BA buyer will not pay more for a property than the cost of an equally desirable substitute✓ Correct
CDepreciation substitutes for physical deterioration
DA seller can substitute a new buyer after a contract falls through
Explanation
The principle of substitution is the foundation of all three appraisal approaches — a buyer will pay no more for a property than the cost of acquiring an equally desirable substitute. This principle drives competitive market pricing.
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