Property Valuation
The principle of substitution states that a buyer will pay no more for a property than:
AThe seller's original purchase price plus improvements
BThe cost of acquiring an equally desirable substitute property✓ Correct
CThe average sale price of all homes in the neighborhood
DThe property's assessed value for tax purposes
Explanation
Substitution is the foundation of the sales comparison and cost approaches. A rational buyer will not pay more for a property than they would need to pay for a comparable substitute.
Related Arkansas Property Valuation Questions
- The principle of contribution in appraisal means:
- Which appraisal approach estimates value by analyzing recent sales of comparable properties?
- When using the sales comparison approach, a 'gross living area' adjustment is made because:
- Effective age differs from actual (chronological) age in that effective age:
- Regression is an appraisal principle that states:
- The principle of contribution states that the value of an improvement is measured by:
- In an appraisal, an adjustment for a comparable sale that is SUPERIOR to the subject property results in:
- A comparative market analysis (CMA) is performed by:
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