Property Valuation
The 'principle of substitution' in real estate valuation means:
AA newer property is always worth more than an older one
BAn informed buyer will pay no more for a property than the cost of an equally desirable substitute✓ Correct
CProperty values can substitute for income values
DOne appraisal method can substitute for another
Explanation
The principle of substitution is a foundational appraisal principle stating that a rational buyer will pay no more for a property than the cost of acquiring an equally desirable substitute — whether buying an existing property or building new. It underlies all three appraisal approaches.
Related South Dakota Property Valuation Questions
- In South Dakota, which statement about the 'sales comparison approach' is correct?
- In South Dakota, which characteristic of value is described as the ability of a property to satisfy human needs and desires?
- In South Dakota, which type of depreciation in the cost approach is considered 'incurable'?
- In South Dakota, the appraiser's final opinion of value in a residential appraisal typically gives the most weight to:
- In South Dakota, when an appraiser analyzes the 'subject property's' location, which factor typically has the greatest impact on residential property value?
- In South Dakota, which of the following is the most reliable comparable sale for a residential appraisal?
- In South Dakota, when using the income approach for a commercial property, the appraiser derives a cap rate by:
- In South Dakota, which factor would most likely cause a DECREASE in cap rates (resulting in higher property values at the same NOI)?
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