Property Valuation
The principle of 'substitution' in real estate appraisal states that:
AA property is worth more than its cost to replace
BA rational buyer will pay no more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CProperties always appreciate over time
DValue is determined solely by location
Explanation
The appraisal principle of substitution underpins all three valuation approaches: a prudent buyer will pay no more for a property than the cost of acquiring an equally desirable and useful substitute property.
Related Florida Property Valuation Questions
- In a buyer's market in Florida, which of the following is most likely TRUE?
- A Florida appraiser excludes a comparable sale from the analysis because the sale was a 'distressed sale' (foreclosure or short sale). This is because:
- A Florida appraiser's report is classified as a 'desktop appraisal.' This means:
- In Florida, an appraisal performed for a federally related transaction must be conducted by a:
- An appraiser finds that a comparable home sold for $285,000 but has an extra half bathroom that the subject property lacks. If a half bathroom contributes approximately $3,500 to value, what adjusted sale price is used for comparison?
- The 'principle of progression' in real estate means that:
- An appraiser determines that a Florida property has an economic life of 40 years, was built 8 years ago, and has no deferred maintenance. Using straight-line depreciation, what percentage of the cost represents accrued depreciation?
- If a property has a net operating income (NOI) of $45,000 and the capitalization rate is 7.5%, what is the estimated value?
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