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Real Estate Appraisal: Chapter 2 Understanding Value

Terms in this set (89)

(Exchange value)
(Value in Exchange)

The value of property as determined by the open market.

The MOST PROBABLE selling price which a property should sell for in a competitive and open market after a reasonable exposure time, as of a specified date, in cash, or in terms equivalent to cash, under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, for self-interest, and assuming that neither is under duress.

It is:
-The amount of cash (or a cash equivalent),
-That a WELL-INFORMED and PRUDENT buyer is MOST LIKELY to pay for a property,
-In a typical transaction on the open market
-After adequate property exposure time

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:

1. The buyer and seller are typically motivated
2. Both parties are well informed or well advised, and acting in what they consider their own best interests
3. A reasonable time is allowed for exposure in the open market
4. Payment is made in terms of cash in US dollars or in terms of financial arrangements comparable thereto, and
5. 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.

Market Value refers to the amount of cash (or cash equivalent) that is most likely to be paid for a property on a given date in a transaction that takes place under normal conditions. A sale can generally be considered to have taken place under normal conditions if:

-It was an arm's length transaction (a sale between unrelated parties, as opposed to family member, friends or business associates)
-Neither the buyer nor the seller was subject to unusual pressure to act (undue stimulus)
-Both the buyer and the seller acted prudently and knowledgeably, and in his or her own best interests; and
-The property was exposed on the open market for a reasonable length of time.