Principles of Value

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Course Assessments

FLORIDA REAL ESTATE SALES ASSOCIATE COURSE

Real Estate Appraisal

Section 11 of 26

Substitution is the foundation for most appraisal methods, specifically the Sales Comparison Approach. It states that a prudent buyer will pay no more for a property than the cost of acquiring an equally desirable substitute. Essentially, if there are two similar houses for sale in the same neighborhood, the buyer will almost always choose the cheaper one. This principle keeps prices in check; a seller cannot successfully charge $500,000 for a home if similar "substitute" homes are readily available for $400,000.