Property Valuation
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 knowledgeably✓ Correct
CThe assessed value assigned by the county for tax purposes
DThe replacement cost of the property minus depreciation
Explanation
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.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
DepreciationA 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
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