As a component of real estate value, the principle of substitution states that

a. If two similar properties are for sale, a buyer will purchase the cheaper of the two.

b. If one of two adjacent homes is more valuable, the price of the other home will tend to rise.

c. If too many properties are built in a market, the prices will tend to go down.

d. People will readily move to another home if it is of equal value.

Question

Business

Abdiel Lang

11 December, 23:56

As a component of real estate value, the principle of substitution states that

a. If two similar properties are for sale, a buyer will purchase the cheaper of the two.

b. If one of two adjacent homes is more valuable, the price of the other home will tend to rise.

c. If too many properties are built in a market, the prices will tend to go down.

d. People will readily move to another home if it is of equal value.

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Answers (1)

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Amy Lucas · Answer 1

a. If two similar properties are for sale, a buyer will purchase the cheaper of the two.

Explanation:

The principle of substitution justifies the idea that the maximum value of a property will be set by the selling price of an equally valuable and desirable substitute property. In this case of property sale, if an area has two similar houses and one is being sold for $912,000 and the other is priced at $105,000, buyers will most likely go for the cheaper one. There is no reason to pay more money if they will be getting a similar property at low cost.