Property Valuation
The principle of substitution states that:
AProperty value increases when supply decreases
BA buyer will pay no more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CThe value of a property is determined by its highest and best use
DProperty values tend to conform to surrounding properties
Explanation
The principle of substitution is the foundation of the sales comparison approach: a rational buyer will not pay more for a property than the cost of obtaining a comparable alternative.
Related Montana Property Valuation Questions
- In the income approach to valuing a Missoula apartment complex, the gross rent multiplier (GRM) is calculated by:
- The cost approach to appraisal is most useful for:
- In the Billings, Montana real estate market, an appraiser using the sales comparison approach would primarily:
- A Montana appraiser evaluating a lakefront property on Flathead Lake must give special consideration to which value-influencing factor unique to that property?
- Functional obsolescence in real estate refers to:
- Curable depreciation in the cost approach refers to:
- The gross rent multiplier for a comparable property that sold for $180,000 with a monthly rent of $1,500 is:
- In Montana, a 'market rent' appraisal for a rental property determines the rent that the property would command:
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