Property Valuation
The 'principle of substitution' in appraisal states that:
AA property will be replaced in the market if its price is too high
BA buyer will not pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CProperties can be substituted for one another in all investment portfolios
DDepreciation can be substituted with capital improvements
Explanation
The principle of substitution underlies all three approaches to value: a rational buyer will not pay more for a property than they would pay for an equally desirable substitute, whether that is a comparable sale, replacement cost, or equivalent income stream.
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