Property Valuation
The principle of substitution in real estate valuation states that:
AA property's value is determined solely by the cost to replace it
BA buyer will not pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CProperty values always increase over time due to scarcity
DTwo similar properties must always sell for the same price
Explanation
The principle of substitution is the foundation of all three appraisal approaches. It states that a rational buyer would not pay more for a property than the cost of acquiring an equally desirable alternative.
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