Property Valuation
The principle of 'substitution' in real estate appraisal means:
AA. A newer property always replaces an older one in value
BB. A buyer will not pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CC. One appraisal method substitutes for another
DD. Properties can be substituted for one another in like-kind exchanges
Explanation
The principle of substitution underlies all three appraisal approaches: a buyer will pay no more than the cost of acquiring a comparable substitute property. This principle sets the upper limit of value.
Related Georgia Property Valuation Questions
- When performing a comparable market analysis (CMA), a Georgia agent should select comparables that:
- Functional obsolescence in a property is caused by:
- In the cost approach, the 'site value' is estimated as if the land were:
- A Uniform Standards of Professional Appraisal Practice (USPAP) is important because it:
- An appraisal done for a refinance is often based on the assumption that:
- External obsolescence (also called economic or locational obsolescence) is:
- A Georgia commercial property has potential gross income of $120,000, vacancy and credit loss of 8%, and operating expenses of $40,000. Using the income approach with a cap rate of 9%, what is the estimated value?
- In a residential appraisal, the most important comparable is generally the one that:
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