Property Valuation
The principle of 'substitution' in real estate appraisal states that:
AA property's value is determined by the highest and best use of the land
BNo prudent buyer will pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CProperty values in a neighborhood tend to be similar due to conformity
DThe value of a component part is measured by its contribution to the whole
Explanation
The principle of substitution states that a buyer will not pay more for a property than the cost of acquiring a comparable substitute. This principle underpins all three appraisal approaches: sales comparison, cost, and income.
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