Property Valuation
The principle of substitution in South Dakota real estate states that:
AA buyer will pay no more for a property than the cost of acquiring a comparable substitute✓ Correct
BProperty value is determined by future income potential
CValue is increased by adding improvements to the property
DThe highest and best use maximizes land value
Explanation
The principle of substitution states that a prudent buyer will pay no more for a property than the cost of acquiring an equally desirable substitute property. It is the foundation of the sales comparison approach.
Related South Dakota Property Valuation Questions
- A South Dakota appraisal using the gross rent multiplier (GRM) divides the sale price by:
- In South Dakota, the highest and best use of a property is defined as the use that is:
- In South Dakota, a 'desk review' appraisal means the reviewing appraiser:
- In South Dakota, 'effective age' of a building differs from 'actual age' because effective age reflects:
- In South Dakota, the 'hedonic pricing model' in real estate refers to:
- A South Dakota property's market value is estimated at $250,000 using the sales comparison approach and $280,000 using the cost approach. The appraiser reconciles the value at $255,000. This process is called:
- An appraiser values a South Dakota ranch property at $1,200 per acre. The property is 2,400 acres. What is the estimated total value?
- In the sales comparison approach to value, an appraiser makes adjustments to comparable sales for differences between the comparable and the subject property. If a comparable sale has a feature the subject property lacks, the appraiser should:
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