In real estate appraisal, the principle of substitution states that the maximum value of a property is limited by the cost of acquiring an equally desirable substitute property. A buyer will not pay more for a property than the cost of obtaining a comparable alternative with similar utility and appeal.
This principle assumes that no undue delay or additional expense is involved in making the substitution. It forms the foundation of several appraisal approaches, particularly the cost and market comparison methods, by emphasizing buyer behavior and market alternatives.
