Property Valuation
The principle of 'substitution' in real estate valuation holds that:
AA property's value is determined solely by the income it generates
BA buyer will not pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CThe value of one property is affected by the values of surrounding properties
DValue is created exclusively by supply and demand forces
Explanation
The principle of substitution is the foundation of all three appraisal approaches. It states that a prudent buyer will not pay more for a property than the cost to obtain an equally desirable alternative, whether through purchase, construction, or investment in income property.
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