What principle does substitution refer to?

Substitution refers to the economic principle which states that the value of a property is influenced by the availability of similar alternatives. This means that if a property can be replaced or substituted with another property that serves the same purpose, the value is determined by the cost of acquiring that alternative. For instance, if a similar house in the same neighborhood is available for a lower price, that lower price will put a cap on how much a buyer is willing to pay for your property, since they could choose the alternative at a more attractive price. This principle is foundational in real estate valuation and helps explain why properties are priced in relation to comparable homes in the area.

The other choices present concepts that do not accurately encapsulate the principle of substitution, focusing instead on different aspects of value assessment in real estate. Thus, the correct understanding of substitution as the influence of similar alternatives is crucial for grasping property valuation dynamics.