Property Valuation
The principle of 'substitution' is the foundation of all three appraisal approaches because it states:
AA property's value is determined by future income potential only
BA prudent buyer will pay no more for a property than the cost of acquiring an equally desirable substitute property, setting an upper limit on value✓ Correct
CProperties in the same neighborhood always have the same value
DThe government determines the maximum value of any property
Explanation
The principle of substitution underlies all three approaches: a buyer will not pay more than the cost of a comparable substitute (sales comparison approach), the cost to build an equivalent (cost approach), or the present value of equivalent income streams (income approach).
Related Oklahoma Property Valuation Questions
- An Oklahoma appraiser's final opinion of value in an appraisal report is expressed as:
- An Oklahoma appraiser completing a full URAR (Uniform Residential Appraisal Report) for a single-family home mortgage loan must comply with:
- An Oklahoma REO (real estate owned) property — one acquired by a bank through foreclosure — will likely be:
- An Oklahoma appraiser must comply with USPAP's Competency Rule if they are asked to appraise a type of property they have not previously appraised. This means they must:
- An Oklahoma appraiser determines that a commercial property's highest and best use is office development, even though it is currently used as a parking lot. Highest and best use analysis considers:
- Gross income multiplier (GIM) analysis differs from GRM analysis in that:
- Functional obsolescence in an Oklahoma property refers to:
- An Oklahoma appraisal that comes in below the contract price can result in:
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