Property Valuation
What is the 'principle of competition' and how does it affect Idaho real estate markets?
ACompetition between buyers to purchase properties
BThe principle that excess profits attract competition, which eventually reduces those profits to a normal level; applied to real estate, high returns in a market attract more investment until returns normalize✓ Correct
CCompetition between real estate agents for listings
DA principle governing bidding wars in hot markets
Explanation
The principle of competition holds that when a business or investment generates above-normal profits, competition will enter the market until profits return to normal. In Idaho real estate, when a certain area shows above-market returns, investors build more product until supply meets demand and returns stabilize. Appraisers apply this principle in highest and best use analysis.
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