Which factor is NOT considered in the principle of substitution?

The principle of substitution is a fundamental concept in real estate valuation that asserts that a buyer will not pay more for a property than the cost to acquire an equally desirable substitute property. This principle helps determine the maximum value for a property based on the costs associated with acquiring similar properties under similar conditions.

In this context, the factors that are typically taken into account include:

• The assessed tax value, which provides a baseline value that reflects public assessment standards.

• The cost of producing an identical property, as it includes expenses associated with construction, materials, and labor.

• The cost of land and improvements, which takes into account the total investment needed to replicate the property.

The potential resale value, while important in the overall market dynamics, is not a direct factor considered within the principle of substitution. It reflects market trends and buyer expectations rather than the immediate cost of alternatives. Therefore, it does not guide the valuation based on the concept of substitution, as it is focused more on prospective rather than comparative value analysis.