Property Valuation
The 'principle of substitution' in real estate appraisal states that:
AA property's value is based on what it could earn in rent
BA buyer will not pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CValue is determined by the cost to replace improvements
DProperties in the same neighborhood should have similar values
Explanation
The principle of substitution states that an informed buyer will pay no more for a property than the cost of acquiring an equally desirable substitute. This principle underlies all three approaches to value.
Related Tennessee Property Valuation Questions
- Depreciation in appraisal refers to:
- In Tennessee, which of the following is a 'super-adequate' feature in a property?
- The reconciliation process in an appraisal involves:
- The cost approach formula is: Value = Land Value + (Cost New − Depreciation). If land value is $80,000, cost new is $250,000, and total depreciation is $40,000, what is the estimated value?
- When the Nashville real estate market has a 2-month supply of homes, this indicates a:
- An appraiser's 'scope of work' document must describe:
- The Tennessee Appraiser Certification and Licensure Board (TACLB) is the state agency that:
- Contributory value is the concept that:
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