Property Valuation
Which of the following is the definition of market value for appraisal purposes?
AThe price a property would sell for on any given day
BThe most probable price a property should sell for in a competitive and open market under all conditions requisite to a fair sale✓ Correct
CThe highest price ever paid for similar properties in the area
DThe assessed value as determined by the local tax assessor
Explanation
Market value is the most probable price a property should bring in a competitive and open market, assuming a willing buyer and seller, adequate exposure time, no undue influence, and both parties acting in their own best interests with full knowledge.
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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.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
DepreciationA reduction in the value of an improvement (building) over time due to physical deterioration, functional obsolescence, or external factors.
Math Concepts
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