The principle of what underlies the adjustments made in the sales comparison approach to value?

The principle of substitution serves as the foundation for the adjustments made in the sales comparison approach to value. This principle states that a rational buyer would not pay more for a property than the cost of acquiring a comparable substitute. When valuing a property using the sales comparison approach, appraisers identify similar properties that have sold recently and make adjustments to account for differences between those properties and the subject property. These adjustments reflect the value that a buyer would place on those differences, ensuring that the value estimate accurately represents what a buyer would be willing to pay for the property in the current market.

By using the principle of substitution, appraisers can rely on market data and comparable sales, allowing for a more objective and market-driven approach to property valuation. The adjustments are made to align the features and qualities of both the subject property and the comparables, thus reflecting the value of the subject property in a way that is understandable and justifiable in a competitive market.