Property Valuation
The 'principle of substitution' in real estate appraisal states that:
AThe highest value property in a neighborhood sets the standard for all other values
BA buyer will not pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CProperties should be appraised at their replacement cost
DThe market will substitute one type of property for another if prices differ
Explanation
The principle of substitution underlies all three appraisal approaches. It holds that a rational buyer will pay no more for a property than the cost to acquire an equally desirable substitute. This is why comparable sales, replacement cost, and income from similar investments set the limits of value.
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