Virginia Real Estate Salesperson Exam — All Questions
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Which appraisal principle holds that the value of a property tends to be set by the cost of acquiring an equally desirable substitute?
- a.Substitution✓
- b.Anticipation
- c.Conformity
- d.Contribution
The principle of substitution states that a buyer will pay no more for a property than the cost of an equally desirable substitute. It underlies the sales comparison approach. Anticipation relates to expected future benefits; conformity to compatibility with surroundings; contribution to the value added by a component.
An appraiser estimates value by subtracting accrued depreciation from the current cost to rebuild the improvements, then adding land value. This is the:
- a.Sales comparison approach
- b.Income approach
- c.Gross rent multiplier method
- d.Cost approach✓
The cost approach estimates value as land value plus the current cost to build the improvements new, minus accrued depreciation. It is most useful for new or special-purpose properties where comparable sales are scarce.