Property Valuation
The principle of substitution states that:
AA property's value is enhanced by its surrounding properties
BA buyer will pay no more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CValue is created by anticipation of future benefits
DThe highest use of land determines its value
Explanation
The principle of substitution is the foundation of the sales comparison approach. It holds that a prudent buyer will not pay more for a property than it would cost to acquire a comparable substitute property with similar utility.
Related California Property Valuation Questions
- When using the sales comparison approach, which of the following properties would typically be selected as a comparable sale?
- The principle of progression states that:
- Which appraisal approach is most commonly used for single-family homes?
- Gross Rent Multiplier (GRM) is calculated as:
- In a sales comparison appraisal, if a comparable sale has a garage and the subject property does not, the appraiser makes an adjustment by:
- Which of the following factors does NOT directly affect a property's market value?
- In the cost approach, what is 'reproduction cost' vs. 'replacement cost'?
- In the income approach to valuation, Net Operating Income (NOI) is calculated as:
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