Florida Real Estate Practice Exam

According to a well-known economic principle, how is a property's value determined?

1. Conforming value

2. Similar cost principle

3. Regression

4. Substitution

The correct answer is: Substitution

Substitution is a well-known economic principle which states that the value of any property or good is determined by the cost of replacing it with a comparable substitute. This method is widely used in real estate and insurance industries to determine the value of a property or asset. Option A, conforming value, is not a commonly known economic principle and is not a valid substitute for the concept of substitution. Option B, similar cost principle, is also not a recognized economic principle. Option C, regression, is a statistical method used to determine correlations between variables and would not apply to determining a property's value. Overall, substitution is the most appropriate answer as it directly connects to the cost and replacement value of a property.