Valuation and Financing Practice Question
Question
A broker is supervising a transaction file involving principle of substitution. Which statement best describes principle of substitution? (Item 146)
Answer choices
- A. It removes the need for written disclosure if the licensee believes the client already knows.
- B. Recognize that buyers compare alternatives and avoid paying more than a substitute property.
- C. It can be ignored if the transaction is expected to close quickly.
- D. It requires the licensee to favor the other party over the licensee’s own client.
Correct Answer
B. Recognize that buyers compare alternatives and avoid paying more than a substitute property.
Explanation
The correct answer is B because principle of substitution requires candidates to recognize that buyers compare alternatives and avoid paying more than a substitute property. The other options overstate the effect of custom, oral agreement, escrow, or independent salesperson action and do not reflect safe California exam practice.
Question details
- Difficulty: medium
- Domain: Valuation and Financing
- Objective: principle of substitution