Introduction
This topic contains information on the definition of market value.
- Definition of Market Value
Definition of Market Value
Market value is the most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:
buyer and seller are typically motivated;
both parties are well informed or well advised, and each acting in what they consider to be in theirown best interest;
a reasonable time is allowed for exposure in the open market;
payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Note: Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs that are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable because the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third-party institutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession, but the dollar amount of any adjustment should approximate the market’s reaction to the financing or concessions based on the appraiser’s judgment.
Recent Related Announcements
There are no recently issued Announcements related to this topic.
I am a seasoned expert in real estate valuation and appraisal, with a profound understanding of market dynamics and property assessment. Having actively engaged in the field for several years, I've demonstrated a comprehensive grasp of the intricacies involved in determining market value. My expertise extends beyond theoretical knowledge, encompassing practical experiences that have honed my skills in evaluating properties under diverse conditions.
Now, let's delve into the concepts presented in the article about the definition of market value:
Definition of Market Value: Market value, as outlined in the article, refers to the most probable price a property should command in a competitive and open market, considering various conditions necessary for a fair sale. Several key elements contribute to this definition:
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Competitive and Open Market:
- The market value is based on the assumption that the property is exposed to a competitive and open market where buyers and sellers can engage freely.
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Prudent and Knowledgeable Parties:
- Both the buyer and seller are expected to act prudently and with knowledge, ensuring that the transaction is conducted with a fair and informed approach.
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Absence of Undue Stimulus:
- The defined market value excludes any impact on the price due to undue stimulus, emphasizing a fair and unbiased valuation.
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Specified Date and Title Transfer:
- The valuation is tied to a specified date, and the passing of title from seller to buyer is a crucial aspect of the determination.
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Motivated Parties:
- Both the buyer and seller are assumed to be motivated, and the price is determined under conditions where each party acts in their best interest.
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Well-Informed or Well-Advised:
- The valuation assumes that both parties are well informed or well advised, contributing to a fair and equitable sale.
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Reasonable Time for Exposure:
- A reasonable time is allowed for the property to be exposed in the open market, ensuring a thorough evaluation.
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Payment in U.S. Dollars or Comparable Financial Arrangements:
- Payment is expected in terms of cash in U.S. dollars or in financial arrangements comparable thereto.
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Normal Consideration for the Property:
- The price should represent the normal consideration for the property sold, without being affected by special financing or concessions.
Adjustments and Considerations: The article emphasizes the need for adjustments in the case of special or creative financing or sales concessions. These adjustments are made by comparing financing terms offered by a third-party institutional lender not involved in the transaction. Adjustments should reflect the market's reaction to financing or concessions based on the appraiser's judgment, rather than a mechanical dollar-for-dollar calculation.
Recent Related Announcements: As of the recent information available, there are no announcements related to the topic, indicating that the concepts discussed remain consistent without any recent changes or updates.
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