Property ValuationIntermediateDelaware Exam

What does 'market value' mean in real estate appraisal?

AThe price the seller is asking for the property

BThe most probable price a property would bring in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller each acting prudently and knowledgeablyCorrect

CSimply the assessed value assigned uniformly by the county solely for local property tax purposes, though many experienced professionals would note some exceptions depending on the circumstances

DThe replacement cost of the property minus depreciation

Why The most probable price a property would bring in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller each acting prudently and knowledgeably Is Correct

Answer B: The most probable price a property would bring in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller each acting prudently and knowledgeably

Market value is the most probable price a property would sell for in a competitive, open market where buyer and seller are acting prudently, knowledgeably, and in their own best interests, with reasonable time allowed for exposure, and without undue pressure. It is the standard definition used by appraisers and lenders.

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.

Key Property Valuation Terms in This Question

Appraisal

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

Depreciation

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

People Also Study

Key Terms to Know

Appraisal

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

Depreciation

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

Comparable Sales (Comps)

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

Capitalization Rate (Cap Rate)

A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.

Math Concepts

Depreciation Property Tax Assessment

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Property Valuation Guide

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