Property Valuation
The principle of substitution states that:
AThe value of a property is determined by its highest and best use
BA buyer will pay no more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CLand value increases as surrounding properties improve
DThe most recent sale sets the market value
Explanation
The principle of substitution holds that the maximum value of a property is set by the cost of acquiring an equally desirable and functional substitute. This principle underpins all three approaches to value.
Related Georgia Property Valuation Questions
- In the sales comparison approach to value, the appraiser makes adjustments to the comparable sales. If a comparable lacks a feature that the subject property has, the appraiser should:
- 'Value in use' differs from 'market value' in that value in use is:
- An 'as improved' appraisal values the property:
- In the income approach, 'potential gross income' (PGI) represents:
- When appraising a property using the income approach, the capitalization rate is determined by:
- In a comparative market analysis (CMA), when a comparable property has a feature the subject property lacks (e.g., a pool), the appraiser/agent should:
- The 'land-to-value ratio' in real estate investment analysis is used to:
- The income approach to value is LEAST appropriate for which property type?
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