According to the principle of substitution, what is true about property value?

The principle of substitution is a foundational concept in real estate appraisal, asserting that a property's value is influenced by the cost of acquiring a similar, equally desirable property. This principle suggests that no prudent buyer would pay more for a property than what they could pay for a comparable one that fulfills the same need. Consequently, if improvements or changes occur in the market that make one property more desirable over another, the value of the less desirable property will not exceed that of the replacement.

This principle aids appraisers and investors in evaluating how properties compare in value and helps to maintain a level playing field in the market. When valuing a property, it is essential to consider what an investor could purchase instead, ensuring that the property's price aligns with the market and current economic conditions.

Regarding the other options, the second choice implies a general consistency in property values, which is not the primary focus of this principle. The third option discusses market competition, and the fourth addresses neighborhood effects which are distinct from the principle of substitution.