According to the principle of substitution, what influences maximum property value?

The principle of substitution states that a buyer will not pay more for a property than the cost of an equally desirable alternative property. This principle is rooted in the idea that if two properties serve similar needs or desires, the one that costs less will be more appealing to buyers. Thus, the maximum value of a property is influenced significantly by the price of comparable properties that have similar features and benefits.

When a buyer is considering purchasing a property, they evaluate their options based on what they could obtain elsewhere for a similar investment. If a comparable property is available at a lower cost, it limits how much a buyer is willing to pay for the first property. Therefore, the cost of an equally desirable property directly establishes the upper limit on what a buyer is willing to spend, reflecting the principle of substitution in real estate valuation.

In contrast, while unique features, market demand, and location benefits certainly influence a property's attractiveness and value, they do not directly determine the maximum price a buyer is prepared to pay when alternatives are available at lower prices.