According to the principle of substitution, which statement is true?

According to the principle of substitution, which statement is true?

• A. Property cannot be worth more than the cost of acquiring an equally desirable replacement property
• B. There should be a reasonable degree of uniformity in property values
• C. Excess profits tend to encourage ruinous competition
• D. A good structure substituted for a bad structure will not cure the ills of the surrounding neighborhood

Answer: (A)

The principle of substitution is a fundamental concept in real estate that suggests that a property's value is determined by the cost of acquiring an equally desirable substitute. This means that an informed buyer will not pay more for a property than they would for another similar property that offers a comparable utility and worth. When applying this principle, if two properties are similar in terms of features, location, and market conditions, a prospective buyer will choose the one that offers the best value, which typically means the least amount of money for the most benefits. Therefore, if a buyer can acquire a property that fulfills their needs for less than the market price of another similar property, they will likely do so. This reasoning underpins real estate appraisal practices, as appraisers often look at comparable sales to determine market value. The notion that property cannot be worth more than the cost of acquiring an equally desirable replacement property directly aligns with this principle, making it the correct statement in this context. The other statements, while they may reflect ideas related to market dynamics and property valuation, do not accurately exemplify the principle of substitution in the same direct manner.

The principle of substitution is a fundamental concept in real estate that suggests that a property's value is determined by the cost of acquiring an equally desirable substitute. This means that an informed buyer will not pay more for a property than they would for another similar property that offers a comparable utility and worth.

When applying this principle, if two properties are similar in terms of features, location, and market conditions, a prospective buyer will choose the one that offers the best value, which typically means the least amount of money for the most benefits. Therefore, if a buyer can acquire a property that fulfills their needs for less than the market price of another similar property, they will likely do so.

This reasoning underpins real estate appraisal practices, as appraisers often look at comparable sales to determine market value. The notion that property cannot be worth more than the cost of acquiring an equally desirable replacement property directly aligns with this principle, making it the correct statement in this context.

The other statements, while they may reflect ideas related to market dynamics and property valuation, do not accurately exemplify the principle of substitution in the same direct manner.