The appraisal process relies heavily on the principle of substitution in developing an estimate of value. This principle holds that typical potential buyers in a marketplace usually are unwilling to pay more for a property than the cost of acquiring an equally desirable substitute property. In considering competing listings, the availability and pricing of new construction should be examined carefully. Since most potential buyers consider new construction more desirable than a previously owned home, the availability of new homes is a limiting influence on the anticipated sales price of a transferee’s existing home.
