Property Valuation
The 'principle of substitution' in real estate valuation states that:
AA. A buyer will always pay more for a unique property
BB. A knowledgeable buyer will pay no more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CC. Properties in the same neighborhood always sell for the same price
DD. Value is determined by the highest and best use only
Explanation
The principle of substitution is the foundation of the sales comparison approach: a buyer will not pay more for a property than the cost of an equally desirable and available substitute. This principle establishes the upper limit of value in the marketplace.
Related Colorado Property Valuation Questions
- When Colorado property values are declining, a seller who insists on pricing their home above comparable sales is experiencing:
- When a Colorado appraiser makes a 'downward adjustment' to a comparable, it means:
- In the income approach to valuation, the capitalization rate (cap rate) is calculated as:
- The sales comparison approach to value is most commonly used for:
- When valuing a property with a 'view easement' granted to a neighboring lot, the appraiser should:
- When performing a sales comparison approach, an appraiser adjusts for differences between the subject property and comparables. If a comparable has a feature the subject lacks, the appraiser should:
- In a residential appraisal, the appraiser uses a 'grid adjustment' to:
- The reliability of the sales comparison approach in Colorado appraisal is most affected by:
Practice More Colorado Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Colorado Quiz →