Which appraisal principle is described by the phrase regarding the value of a substitute property?

The principle being referred to in the phrase regarding the value of a substitute property aligns with the concept of substitution. This principle posits that the maximum value of a property is determined by the cost of acquiring an equally desirable substitute property. Essentially, if a buyer is presented with a property, they will evaluate its worth based on what they could obtain through an alternative option that serves a similar purpose.

If a property is too expensive compared to similar properties on the market, potential buyers are likely to opt for those substitutes instead, thus impacting the value of the more expensive property. This principle plays a critical role in property valuation, influencing appraisals and market analysis.

Understanding substitution helps professionals in the real estate industry to assess market conditions and guide clients towards making informed purchasing, selling, or investing decisions.