Property Valuation
The principle of substitution in real estate valuation states that:
AA buyer will pay more for a unique property with no substitutes
BThe maximum value of a property is set by the cost of acquiring an equally desirable substitute✓ Correct
CGovernment regulation controls maximum property values
DSellers may substitute one property for another in 1031 exchanges freely
Explanation
The principle of substitution is the foundation of the sales comparison and cost approaches: a rational buyer will not pay more for a property than the cost of acquiring a comparable substitute property.
Related Washington Property Valuation Questions
- An appraiser notes that a newly built 6,000 sq ft single-family home is located in a neighborhood of 1,500–2,000 sq ft homes. The large home likely suffers from:
- In Washington, the cost approach to value is most reliable for appraising:
- In Washington, an appraisal for a federally related transaction (FHA, VA, conventional with Fannie/Freddie) must be performed by:
- In Washington, an appraiser's scope of work is determined by:
- Plottage (or assemblage) in Washington real estate refers to:
- A Washington appraiser developing the sales comparison approach must ensure that each comparable sale is:
- When appraising a single-family home in Seattle, an appraiser would give the MOST weight to the:
- The principle of progression states that the value of an inferior property is:
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