Which principle of value incorporates external factors affecting property value?

The principle that best incorporates external factors affecting property value is indeed focused on the various aspects outside the property that can influence its market value. External factors encompass aspects such as the overall economic conditions, changes in local demographics, and the proximity to amenities such as schools, parks, and shopping centers. These elements can significantly impact a property’s desirability and worth in the eyes of potential buyers and appraisers.

While other principles like substitution, conformity, and competition are essential in understanding value, they primarily relate to internal aspects or comparative measures rather than addressing the broader external influences on property value. Substitution refers to the idea that a buyer will not pay more for a property than what it would cost to purchase an equivalent property, thereby relating to competitive pricing. Conformity suggests that a property achieves its highest value when it conforms to the standards of the neighborhood or community. Competition indicates that an increase in supply can drive prices down. However, these concepts do not encapsulate the wide range of external factors that directly or indirectly affect property values, making the selection of external factors the most fitting answer for this question.