Valuation and Analysis, 14% of the examination

Principle of substitution

The maximum value of a property tends to be set by the cost of acquiring an equally desirable substitute.

Substitution is the foundation of the sales comparison approach and the reason comparables matter at all. Related principles include contribution, which measures what one component adds to the whole, conformity, progression and regression.

See it in a question

One question from Valuation and Analysis, so the term lands in the context the exam uses it in.

Valuation and Analysis · 14%Methods of Estimating Value

An appraiser values a 40-year-old single-family home in an established neighbourhood with many recent sales. Which approach carries the most weight?

Written to DRE's published topic list. Not a real examination question, since reproducing those is a misdemeanour under B&P Code section 123.

Where this is tested

Property Valuation and Financial AnalysisThree short sub-topics carrying fourteen percent, and most of the arithmetic on the exam. The three approaches to value, and the income analysis that turns a rent roll into a number.14%Practise Valuation and Analysis28 questions on this area, every option explained.Practice

See it in a question

Where this is tested

Other terms in this area