The principle that the value of a property is affected by the availability of substitutable properties is called what?

• A. Conformity
• B. Anticipation
• C. Progression
• D. Substitution

Answer: (D)

Substitution is the idea that a property's value is determined by the cost of an equally desirable substitute. When there are readily available comparable homes, buyers compare options and won’t pay more than the price of those substitutes, so the value of a property stays in line with what similar properties are selling for. For example, if three comparable homes nearby are selling for around $300,000, a fourth home with similar desirability and condition won’t command a significantly higher price just because it’s in the same area. If substitutes become scarce or more attractive, value can rise because buyers have fewer alternatives. This principle is distinct from conformity (value adjusts toward nearby properties), anticipation (future benefits influencing value), and progression (lower-valued properties rising when neighboring homes improve).