Property Valuation
The principle of substitution states that a buyer will pay no more for a property than the cost of:
ABuilding an identical structure on a different lot
BAn equally desirable substitute property✓ Correct
CReplacing all improvements at today's prices
DThe assessed value as determined by the county
Explanation
The principle of substitution states that an informed buyer will pay no more for a property than the cost to acquire an equally desirable substitute property. This principle underlies the sales comparison approach.
Related North Dakota Property Valuation Questions
- An appraiser values a Fargo strip mall. The building's cost new is $1,200,000, physical depreciation is $180,000, functional obsolescence is $60,000, and the land value is $250,000. What is the indicated value by the cost approach?
- Functional obsolescence in appraisal refers to:
- Which type of depreciation is ALWAYS incurable?
- An appraiser makes a negative (-$8,000) adjustment to a comparable. This means:
- An appraiser performing a Uniform Residential Appraisal Report (URAR) in North Dakota must comply with:
- What is 'functional obsolescence' as it applies to a 1960s-era home in Grand Forks, ND?
- A North Dakota appraiser is making adjustments to comparable sales. If a comparable home sold for $250,000 but has an extra bathroom that the subject property lacks, the appraiser would:
- The sales comparison approach to value requires the appraiser to:
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