Property Valuation
The principle of substitution in Iowa appraisal theory states that:
AA property's value is determined solely by its cost of construction
BA buyer will pay no more for a property than the cost of acquiring an equally desirable substitute property✓ Correct
CValue is created by the anticipation of future benefits
DValue is based on the property's assessed tax value
Explanation
The principle of substitution holds that an informed buyer will not pay more for a property than the cost of acquiring an acceptable substitute. This principle underlies all three appraisal approaches.
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