Which principle states that in an open market, properties of equal utility should sell for equal prices?

The correct choice is the principle of substitution, which posits that in an open market, if two properties provide similar utility or serve the same function, they should sell for roughly equal prices. This principle drives home the idea that buyers will not pay more for one property than they would for another comparable property. Essentially, if a buyer can find another property that serves the same purpose at a lower price, they would likely choose the less expensive option.

This principle is foundational in real estate appraisal, as it helps appraisers determine market value by comparing similar properties to establish a price point that reflects market dynamics accurately. Additionally, the concept reinforces the importance of looking at comparable sales to gauge the fair market value of a property.

In contrast, other concepts, such as the principle of contribution, focuses on the value added by particular improvements to a property; the principle of highest and best use emphasizes the most profitable and feasible use of a property; and the principle of conformity suggests that properties of similar design and character tend to be more valuable in areas where there is homogeneity. While these principles have their importance in real estate, they do not specifically address the relationship of price among properties of equal utility, which is the essence of the principle of substitution.