What is a key factor that affects the application of the Principle of Substitution?

The Principle of Substitution is based on the concept that a buyer will not pay more for a property than they would for a comparable, equally desirable substitute. Therefore, market alternatives play a crucial role in this principle. If a property has numerous similar options available, its value is limited to what is being asked for those alternatives. Buyers will look at what other properties similar in quality, size, location, and amenities are available and make decisions based on that comparison.

When there are strong market alternatives, it keeps the property's price in check because potential buyers can easily choose another comparable option if the price is deemed too high. This means that the presence or absence of similar properties directly influences how buyers perceive value, making market alternatives a key factor in the application of the Principle of Substitution.

In contrast, while scarcity of similar properties can influence value, it does so from a different angle. If there are few alternatives, the property may be valued higher than it would otherwise be. Economic conditions and the age of the property may also have an impact, but they do not directly address the Principle of Substitution as effectively as the mental comparison buyers make with available market alternatives.