Property Valuation
What is 'market value' as defined in real estate appraisal?
AThe price a seller asks for the property
BThe most probable price a property would bring in a competitive market under normal conditions between informed and willing parties✓ Correct
CThe assessed value as determined by the county assessor
DThe average of the last three sales prices in the neighborhood
Explanation
Market value is defined as the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. This is the standard definition used by appraisers, lenders, and the courts.
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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.
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.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Math Concepts
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