Property Valuation
The principle of substitution in real estate appraisal states that:
AA property's value is determined by its future income potential
BA buyer will not pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CProperty values always increase over time
DThe highest and best use determines maximum value
Explanation
The principle of substitution holds that a prudent buyer will not pay more for a property than the cost of acquiring a comparable substitute. This principle underlies the sales comparison approach.
Related Connecticut Property Valuation Questions
- The 'three approaches to value' used by Connecticut appraisers are:
- In Connecticut, a property with a 'split-level' design in a neighborhood where all homes are ranch-style may suffer from which type of depreciation?
- A Connecticut property's income statement shows: Potential gross income $96,000; vacancy 5%; operating expenses $32,000. What is the NOI?
- A Connecticut property has a GRM of 140 based on comparable sales. The subject property rents for $2,800 per month. What is the estimated value?
- A Connecticut appraiser identifies three comparable sales. After adjustments, the indicated values are $490,000, $495,000, and $492,000. The appraiser gives greatest weight to the most comparable sale, arriving at a final value of $492,000. This is called:
- In the income approach, 'potential gross income' is calculated by assuming:
- A Connecticut appraiser finds that a comparable property has an extra half-bathroom compared to the subject property. The appraiser will make a:
- A Connecticut town revalues properties every several years to:
Practice More Connecticut Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Connecticut Quiz →