Property Valuation
The principle of substitution underpins which appraisal approach?
AOnly the income approach
BOnly the cost approach
CAll three appraisal approaches✓ Correct
DOnly the sales comparison approach
Explanation
The principle of substitution — that a buyer will not pay more for a property than the cost to acquire an equally desirable substitute — underlies all three appraisal approaches. In the sales comparison approach, the substitute is a comparable sale; in the cost approach, rebuilding; in the income approach, an alternative investment with equal returns.
Related Alaska Property Valuation Questions
- An Alaska appraiser is estimating the value of a 20-unit apartment complex. The appraiser determines the NOI is $95,000 and selects a cap rate of 7%. The indicated value by the income approach is:
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