Valuation and Financing Practice Question

Question

A license applicant is studying a California practice scenario involving principle of substitution. Which statement best describes principle of substitution? (Item 6)

Answer choices

1. A. It shifts all responsibility to escrow and eliminates the broker’s duties.
2. B. Recognize that buyers compare alternatives and avoid paying more than a substitute property.
3. C. It makes oral promises enforceable in every real estate transaction.
4. D. It is optional whenever both parties verbally agree to proceed.

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

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