Property Valuation
The principle of substitution states that a buyer will pay no more for a property than:
AIts assessed value
BThe cost of acquiring an equally desirable substitute property✓ Correct
CThe seller's original purchase price
DThe replacement cost of the improvements
Explanation
The principle of substitution is the foundation of the sales comparison approach. A buyer will not pay more for a property than the cost of purchasing a comparable substitute.
Related Alabama Property Valuation Questions
- An appraiser notes a comparable that is superior to the subject in one key feature. The appraiser should:
- A property has a gross monthly rent of $2,000. Comparable properties have sold at a Gross Rent Multiplier (GRM) of 120. What is the estimated value?
- A broker's price opinion (BPO) differs from a formal appraisal in that a BPO:
- In Alabama, property is assessed for tax purposes at what percentage of fair market value for residential property?
- An appraisal report must comply with which set of professional standards?
- When appraising a property using the income approach, stabilized NOI is used rather than actual current NOI because:
- In the sales comparison approach, the subject property is compared to which of the following?
- The principle of increasing and decreasing returns states that adding more improvements to a property:
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