What concept ensures a buyer will not pay more for a property than similar properties in the area would cost?

• A. Principle of substitution
• B. Law of supply and demand
• C. Principle of conformity
• D. Value in use

Answer: (A)

Substitution is the idea that sets the upper bound on what someone will pay: a buyer won’t pay more for a property than the cost of an equally desirable substitute in the same area. Because there are comparable homes available, competition among properties keeps price in line with what similar properties cost. Appraisers rely on this by comparing recent sales of nearby homes to estimate value. The other concepts touch on different price drivers: the law of supply and demand describes overall market pressures, value in use relates to what the property is worth to a particular owner, and conformity concerns how property values tend to mirror the neighborhood pattern.