Property ValuationIntermediateAlabama Exam

Which of the following BEST defines 'market value'?

AThe price a seller would accept under distress conditions, which is the approach most often followed

BThe most probable price a property would bring in a competitive open market under normal conditionsCorrect

CThe property's assessed value for tax purposes

DThe replacement cost of the improvements

Why The most probable price a property would bring in a competitive open market under normal conditions Is Correct

Answer B: The most probable price a property would bring in a competitive open market under normal conditions

Market value is the most probable price a property should bring in an open, competitive market assuming: both buyer and seller are knowledgeable, acting in their own interest, not under duress, and the property has been exposed to the market for a reasonable time.

Exam Tip: Property Valuation

Valuation questions focus on the three approaches to value: sales comparison, cost, and income. Know which approach is best for which property type. The income approach uses cap rate and NOI — memorize these formulas.

People Also Study

Key Terms to Know

Appraisal

A professional estimate of a property's market value prepared by a licensed or certified appraiser.

Comparable Sales (Comps)

Recently sold properties similar in size, condition, and location used by appraisers and agents to estimate a property's market value.

Depreciation

A reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.

Option Contract

A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.

Math Concepts

Property Tax Assessment

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Property Valuation Guide

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