BC Real Estate Trading Services Licensing Exam Practice · Question
Which factor does NOT directly influence the 'principal of substitution' in property appraisal?
The 'principle of substitution' states that a prudent buyer will pay no more for a property than the cost of acquiring an equally desirable substitute, consider
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Question: Which factor does NOT directly influence the 'principal of substitution' in property appraisal?
Answer options:
- The cost to build a new, similar property.
- The selling prices of comparable available properties. ✅ The sentimental value of the property for the current owner.
- The rental income a property could generate.
Correct answer: The sentimental value of the property for the current owner.
Explanation: The 'principle of substitution' states that a prudent buyer will pay no more for a property than the cost of acquiring an equally desirable substitute, considering cost, potential income, or utility. Sentimental value is subjective and not an objective market factor.
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Question explanations
- A developer, Grandview Developments Ltd., plans to build a new condominium project in Kelowna. They register a
- Michael, a real estate licensee, is assisting his client Jane in purchasing a commercial property at 123 Main
- A buyer, David, has entered into a Contract of Purchase and Sale for a vacant lot in Tofino. David's lawyer di
- Maria is purchasing a unit in a newly constructed strata building in Squamish. Her real estate licensee, Ken,
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