What principle states that a buyer will not pay more for a property than for a substitute of equal utility?

The principle that states a buyer will not pay more for a property than for a substitute of equal utility is known as the Principle of Substitution. This principle is fundamental in real estate appraisal and economic theory, as it establishes that if two properties have similar utility or fulfill the same needs, a rational buyer will choose the less expensive option.

When applied to real estate, this principle helps appraisers determine the value of a property based on the cost of acquiring an equally desirable alternative. If a buyer can find a comparable property that provides the same benefits at a lower price, they are unlikely to pay more for a different property, thus establishing a ceiling on value.

This principle is crucial for understanding market dynamics, as it influences demand and pricing strategies. Confusion might arise with concepts like the Appraisal Principle, Market Value Principle, and Utility Value Principle, but these focus on different aspects of valuation and do not specifically address the comparison of substitutes in terms of cost and benefit. Therefore, the Principle of Substitution is the appropriate concept as it directly relates to how buyers assess the worth of properties based on available alternatives.