valuation
substitution
Substitution is the appraisal principle that a buyer will pay no more for a property than the cost of acquiring an equally desirable substitute property. It is the foundation of the sales comparison approach, and it also supports the cost and income approaches. When similar properties are available, the one with the lowest price tends to attract buyers first.
- Exam tip
- Substitution is the principle most closely linked to the sales comparison approach. Watch for questions asking which principle underlies comparing similar homes.
- Example
- Two nearly identical houses are for sale on the same street, one at $310,000 and one at $330,000. A buyer will likely choose the $310,000 home.
Related terms & state variants
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Last verified: 2026-10-23