According to the principle of substitution, what would an informed buyer pay for a property compared to a similar one?

The principle of substitution holds that a rational buyer will not pay more for a property than what it would cost to purchase an equally desirable substitute. This is a fundamental concept in real estate that drives the pricing of properties in the market. Essentially, if there are two similar properties available, an informed buyer will evaluate their options based on features, location, and other factors, but they will typically gravitate toward the one that offers the best value.

In this case, stating that an informed buyer would pay "no more" for a property compared to a similar one aligns perfectly with the principle of substitution. It emphasizes the idea that buyers are conscious of alternatives and motivated to find the best deal, rather than allowing themselves to overpay significantly above the market value set by comparable properties.

The other answer choices suggest significant markups over the comparative property value, which contradicts the principles of a market-based valuation approach that relies on informed and rational decision-making by buyers. By adhering to the principle of substitution, buyers aim to avoid scenarios where they would significantly overextend themselves financially for a property that is essentially similar to another available option.