Property Valuation
In Oregon, what is the 'principle of substitution' and why is it important to appraisers?
AThe principle that newer properties always replace older ones in value
BThe principle that a buyer will not pay more for a property than they would pay for an equally desirable substitute property✓ Correct
CThe principle that one appraisal method substitutes for another when data is unavailable
DThe principle that lenders substitute one appraiser for another when values are contested
Explanation
The principle of substitution underlies all three appraisal approaches: a rational buyer will not pay more for a property than the cost to acquire an equivalent substitute. In the sales comparison approach, it means comparable sales set the ceiling on value.
Related Oregon Property Valuation Questions
- An Oregon appraiser using the income approach values a property at $950,000. The property generates $76,000 net operating income annually. What capitalization rate was used?
- The principle of 'substitution' in real estate appraisal states that:
- In Oregon, a comparative market analysis (CMA) is typically performed by:
- The principle of 'highest and best use' in real estate appraisal requires that the use be:
- In the sales comparison approach, an 'arm's length transaction' is preferred because:
- In the income approach, 'potential gross income' (PGI) is the income a property would generate if it were:
- An appraiser notes that a comparable sale has a 3-car garage while the subject has only a 2-car garage. The appraiser would make which adjustment to the comparable?
- Under the cost approach, 'accrued depreciation' refers to:
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