Which principle of value states that a property’s value is influenced by its competition?

The principle of value that states a property’s value is influenced by its competition is competition itself. This principle recognizes that the value of real estate is not determined in isolation; it is affected by comparable properties in the market. When similar properties are available for sale, buyers weigh their options, which can lead to price adjustments based on the availability and features of competing properties.

For example, if a particular neighborhood has several homes for sale at various price points, the value of each property is likely to be influenced by the prices and features of the others. If one home offers more square footage or additional amenities at a competitive price, it may reduce the desirability or perceived value of similar homes in the area.

In contrast, the other principles, such as substitution, change, and conformity, focus on different aspects of value determination. Substitution relates to buyers' tendency to choose the least expensive alternative when available. Change involves how market conditions evolve over time, affecting property values. Conformity pertains to how properties aligned with the neighborhood's standards tend to have higher values. Understanding competition is essential for assessing property value accurately in a dynamic real estate market.