Which principle suggests that properties will be valued based on recent sales of similar properties?

The principle of substitution asserts that a buyer will not pay more for a property than the cost of acquiring an equally desirable alternative. This principle is fundamental in real estate valuation, as it indicates that the value of a property is influenced by the prices of similar properties recently sold in the market. When valuing a property, one can look at comparable sales or "comps" to determine a fair market value, thereby linking the property's worth to recent transactions of similar real estate.

While market analysis is indeed a process used to assess these values, the principle of substitution specifically captures the essence of how similar properties affect pricing decisions. In contrast, comparative pricing could imply a broader concept that doesn't necessarily focus on the specific and guiding principles of valuation. Value determination is a broader term that might include various methodologies but does not pinpoint the fundamental rationale of substituting one property for another in assessing value. Understanding this principle is crucial for real estate professionals when conducting appraisals or advising clients on property investments.