Which appraisal theory says that the maximum amount a buyer will pay is based on the price of the competing property?

The appraisal theory known as, "Substitution" suggests the highest, or maximum, sum of money that a potential buyer may be likley willing to pay toward a "substitute" property. The considered "substitute" property would be suitable as such when it meets basic criteria which typically includes, but not always limited to: use, desired/comparable function (as the original property), as well as comparable value. Other features, such as design, typically fall into this criteria as well.The value of the substitute property is surmised of the original property value, and from these the maximum value of the property is set.

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