Download market value

THE NATURE OF VALUE
• DISTINCTIONS AMONG PRICE,
MARKET, COST, AND VALUE
– PRICE:
THE AMOUNT A PARTICULAR
PURCHASER AGREES TO PAY AND A
PARTICULAR SELLER AGREES TO
ACCEPT UNDER THE CIRCUMSTANCES
SURROUNDING THEIR TRANSACTION
– MARKET:
A SET OF ARRANGEMENTS IN WHICH
BUYERS AND SELLERS ARE BROUGHT
TOGETHER THROUGH THE PRICE
MECHANISM. DEFINED BY LOCATION,
PRODUCTS, THE NUMBER OF BUYERS
AND SELLERS, ETC.
– COST:
IN THE CONTEXT USED IN APPRAISAL
COST REFERS TO THE COST FOR
PRODUCTION NOT EXCHANGE.
A PRICE PAID IN THE PAST, OR THE
AMOUNT NEEDED TO CONSTRUCT A
BUILDING TODAY.
– VALUE:
ANTICIPATION OF BENEFITS TO BE
OBTAINED IN THE FUTURE.
REPRESENTS THE MONETARY WORTH
OF PROPERTY, GOODS, OR SERVICES TO
BUYERS AND SELLERS.
• THE VALUE ESTIMATE MAY BE:
–
–
–
–
MARKET VALUE
USE VALUE
ASSESSED VALUE
OTHER VALUE ESTIMATE
MARKET VALUE
• THE MOST PROBABLE PRICE AS OF A SPECIFIED
DATE, IN CASH, OR OTHER PRECISELY REVEALED
TERMS, FOR WHICH THE SPECIFIED PROPERTY
RIGHTS SHOULD SELL AFTER REASONABLE
EXPOSURE IN A COMPETITIVE MARKET UNDER
ALL CONDITIONS REQUISITE TO FAIR SALE, WITH
THE BUYER AND SELLER EACH ACTING
PRUDENTLY, KNOWLEDGEABLY, AND FOR SELFINTEREST, AND ASSUMING THAT NEITHER IS
UNDER UNDUE DURESS.
FUNDAMENTAL ASSUMPTIONS AND
CONDITIONS
1. BUYER AND SELLER ARE MOTIVATED BY SELFINTEREST.
2. BUYER AND SELLER ARE INFORMED AND ARE
ACTING PRUDENTLY.
3. THE PROPERTY IS EXPOSED FOR A REASONABLE
TIME ON THE OPEN MARKET.
4. PAYMENT IS MADE IN CASH, ITS EQUIVALENT, OR
IN SPECIFIED FINANCING TERMS.
5. SPECIFIED FINANCING, IF ANY, WAS IN TERMS
THAT ACTUALLY TOOK PLACE OR WERE
GENERALLY AVAILABLE FOR THE PROPERTY
TYPE IN ITS LOCALE ON THE EFFECTIVE
APPRAISAL DATE.
6. THE EFFECT, IF ANY, ON THE AMOUNT OF
MARKET VALUE OR ATYPICAL FINANCING,
SERVICES, OR FEES SHALL BE CLEARLY AND
PRECISELY REVEALED IN THE APPRAISAL.
PROBABLE PRICE
• THE MOST LIKELY AMOUNT OF MONEY AT WHICH
A PROPERTY WILL SELL (UNDER THE ECONOMIC,
SOCIAL, AND POLITICAL CONDITIONS
PREVAILING AT THE DATE OF THE APPRAISAL
AND UNDER CONDITIONS REQUISITE TO FAIR
SALE).
COMPETITIVE AND OPEN MARKET
• A REASONABLE TIME IS ALLOWED FOR
EXPOSURE ON THE OPEN MARKET.
BUYER AND SELLER EACH ACTING
PRUDENTLY
• TYPICALLY MOTIVATED; WELL INFORMED OR
ADVISED; ACTING IN OWN SELF-INTEREST; AND
NOT UNDER UNDUE DURESS.
OTHER TYPES OF VALUE
• USE VALUE:
– THE VALUE A SPECIFIC PROPERTY HAS
FOR A SPECIFIC USE. AN EXAMPLE IS
AGRICULTURAL USE VALUATION FOR
PROPERTY TAX PURPOSES.
• ASSESSED VALUE:
– APPLIES IN AD VALOREM TAXATION
AND REFERS TO THE VALUE OF A
PROPERTY ACCORDING TO THE TAX
ROLLS. MAY OR MAY NOT CONFORM
TO MARKET VALUE.
• INVESTMENT VALUE:
– THE VALUE OF AN INVESTMENT TO A
PARTICULAR INVESTOR BASED ON HIS
OR HER INVESTMENT REQUIREMENTS.
FACTORS OF VALUE
• UTILITY
– THE ABILITY OF A PRODUCT TO SATISFY
HUMAN WANTS. RELATES TO THE DEMAND
SIDE OF THE MARKET.
• SCARCITY
– THE PRESENT OR ANTICIPATED SUPPLY OF AN
ITEM RELATIVE TO THE DEMAND. RELATES TO
THE SUPPLY SIDE OF THE MARKET.
• DESIRE
– THE PURCHASER’S WISH FOR AN ITEM.
DEMAND SIDE OF THE MARKET.
• EFFECTIVE PURCHASING POWER
– THE ABILITY OF AN INDIVIDUAL OR
GROUP TO PARTICIPATE IN THE
MARKET. DEMAND SIDE OF THE
MARKET.