Buying a similar house three blocks from the area school instead of one closer is an example of which principle?

The principle being illustrated is substitution, which states that a buyer will not pay more for a property than the cost of an equally desirable alternative. In this scenario, choosing to buy a similar house further away from the area school instead of one that is closer demonstrates this principle.

The buyer assesses the value and utility of both properties and decides that, despite one being closer to a desirable feature (the school), the house three blocks away is still a comparable option that meets their needs at a potentially lower price. This decision reflects the idea that if multiple properties are available with similar characteristics and one is less expensive due to a less desirable feature (like distance from the school), the lower-priced property is the rational choice.

This principle is crucial for appraisers and assessors as they evaluate property values based on comparable sales and market behavior. The aspect of considering alternatives and their respective values is fundamental when determining a property’s market position.