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THE NATURE OF 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:

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THE NATURE OF VALUE

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  1. 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

  2. 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.

  3. 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.

  4. VALUE: ANTICIPATION OF BENEFITS TO BE OBTAINED IN THE FUTURE. REPRESENTS THE MONETARY WORTH OF PROPERTY, GOODS, OR SERVICES TO BUYERS AND SELLERS.

  5. THE VALUE ESTIMATE MAY BE: • MARKET VALUE • USE VALUE • ASSESSED VALUE • OTHER VALUE ESTIMATE

  6. 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 SELF-INTEREST, AND ASSUMING THAT NEITHER IS UNDER UNDUE DURESS.

  7. FUNDAMENTAL ASSUMPTIONS AND CONDITIONS 1. BUYER AND SELLER ARE MOTIVATED BY SELF-INTEREST. 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.

  8. 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.

  9. 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).

  10. COMPETITIVE AND OPEN MARKET • A REASONABLE TIME IS ALLOWED FOR EXPOSURE ON THE OPEN MARKET.

  11. BUYER AND SELLER EACH ACTING PRUDENTLY • TYPICALLY MOTIVATED; WELL INFORMED OR ADVISED; ACTING IN OWN SELF-INTEREST; AND NOT UNDER UNDUE DURESS.

  12. 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.

  13. 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.

  14. INVESTMENT VALUE: • THE VALUE OF AN INVESTMENT TO A PARTICULAR INVESTOR BASED ON HIS OR HER INVESTMENT REQUIREMENTS.

  15. 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.

  16. 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.

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