Substitution

The principle of Substitution holds that a prudent buyer will pay no more for real estate than the cost of purchasing or building a reasonable substitute.

 

If several goods or services (including real estate) are provided, the one with the lowest price will attract the greatest demand and widest distribution.

 

Substitution is the basis for the Cost Approach to Value and the Sales Comparison Approach to Value.

Page url: http://www.georgiaappraiser.com/glossary/index.html?substitution.htm