Property Valuation
The principle of substitution states that:
AA property's value is determined by its replacement cost
BA buyer will not pay more for a property than the cost of acquiring an equally desirable substitute✓ Correct
CImprovements should be substituted for older features to maximize value
DProperties in the same area should be valued equally
Explanation
The principle of substitution is foundational to all three appraisal approaches. It holds that a rational buyer will pay no more for a property than the cost to acquire a comparable substitute on the open market.
Related Tennessee Property Valuation Questions
- An appraiser determines that the subject property has 2,000 square feet and a comparable sold for $90 per square foot with 1,800 square feet. Using gross living area analysis, what does the comparable suggest the subject is worth?
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