Ch 13

Question 1

Value definition

Answer 1

Value is an opinion.

1. The monetary relationship between properties and those who buy, sell, or use those properties. Value expresses an economic concept. As such, it is never a fact but always an opinion of the worth of a property at a given time in accordance with a specific definition of value. In appraisal practice, value must always be qualified - for example, market value, liquidation value, or investment value. (USPAP,2016-2017 ed.)
2. The present worth of the future benefits that accrue to real property ownership.

Question 2

Price definition

Answer 2

Price is a fact

1. The amount paid in exchange for a good or commodity. Price is distinguished from value because price becomes a fact when the transaction is consummated as opposed to
   value, which is an estimate.
2. The amount asked, offered, or paid for a property. Comment: Once stated, price is a fact, whether it is publicly disclosed or retained in private. Because of the financial
   capabilities, motivations, or special interests of a given buyer or seller, the price paid for a property may or may not have any relation to the value that might be ascribed to that property by others. (USPAP, 2016-2017 ed.) 11

Question 3

Cost definition

Answer 3

1. The total dollar expenditure to develop an improvement; applies to either reproduction of an identical improvement or replacement with a functional equivalent, not exchange (price).
2. The amount required to create, produce, or obtain a property. Comment: Cost is either a fact or an estimate of fact. (USPAP, 2016-2017 ed.) In USPAP, the term cost is used either as a historic fact or as an appraisal estimate of current future or historic reproduction or replacement cost.

Question 4

…market value is “The xx price that the specified property interest should sell for …

Answer 4

most probable

Question 5

…arms length transaction. This is defined as

Answer 5

“A transaction between unrelated parties who are each acting in their own best interest.”

This means the two parties are standing at arm’s length and negotiating freely with no attachments, without duress.

Question 6

Exposure time is a xx developed by the appraiser.

Answer 6

retrospective opinion

Question 7

When an opinion of reasonable exposure time
is x in a real property appraisal assignment, it must also be x.

Answer 7

developed
reported

Question 8

Exposure time is defined

Answer 8

The time a property remains on the market.

A retrospective estimate based on an analysis of past events assuming a competitive and open market.”

Question 9

Sources to develop the opinion of reasonable exposure time:

Answer 9

• statistical information about days on market;
• information gathered through sales verification;
• interviews of market participants; and
• information from data collection services” 4

Question 10

“A type of value that reflects the amount that can be obtained for an asset if exchanged between parties. Examples include market value, fair value, liquidation value, and disposition value.” defines

Answer 10

Value in exchange

Question 11

“The value of a property assuming a specific use, which may or may not be the property’s highest and best use on the effective date of the appraisal. Value in use may or may not be equal to market value but is different conceptually. “ defines

Answer 11

Value in use

Question 12

“The value of a property interest to a particular investor or class of investors based on the investor’s specific requirements. Investment value may be different from market value because it depends on a set of investment criteria that are not necessarily typical of the market.” defines

Answer 12

Investment value

Question 13

“A type of value for insurance purposes.” defines

Answer 13

Insurable value

Question 14

“The value of a property according to the tax rolls in ad valorem taxation; may be higher or lower than market value, or based on an assessment ratio that is a percentage of market value.” defines

Answer 14

Assessed value

Question 15

“A value that cannot be imputed to any part of the physical property, e.g., the excess value attributable to a favorable lease or mortgage, the value attributable to goodwill. “ defines

Answer 15

Intangible value

Question 16

“The market value of an established and operating business including the real property,
personal property, financial assets, and the intangible assets of the business.” defines

Answer 16

Market value of going concern

Question 17

Monetary worth attributed to features that have no measurable worth in the market but may benefit the public or a specific segment of the public. While contrary to the theory of market value, public interest value is sometimes used to rationalize payment of a price that exceeds market value based on benefits to society resulting from increased ad valorem tax revenues, benefits of increases or changes in the value of surrounding property values, aesthetics, broad social benefits, and other factors. Reliance on public interest value to justify an above- market price is driven by politically motivated public policy and/or the efforts of special interest groups. Public interest value has sometimes been referred to as natural value, intrinsic value, aesthetic value, scenic value, preservation value, and similar terms.” defines

Answer 17

Public Interest Value

Question 18

“1. The capital amount at which property is shown on the account books of a corporation or individual. The net amount at which an asset is carried on the books or reported in financial statements; the asset’s cost at acquisition, reduced by the amount of accumulated depreciation on the asset.
2. With respect to a business enterprise, the difference between total assets (net of depreciation, depletion, and amortization) and total liabilities of an enterprise as they appear on the balance sheet. It is synonymous with net book value, net worth, and shareholder’s equity
3. In accounting, the net amount shown for an asset on the balance sheet. The book value equals the gross cost less the related valuation account. For example, the book value of an automobile is its initial cost less the accumulated depreciation. Because book value is based on historical cost, it may differ from market value.” defines

Answer 18

Book Value

Question 19

“The most probable price that a specified interest in real property should bring under the following conditions:

1. Consummation of a sale within a short time period.
2. The property is subjected to market conditions prevailing as of the date of valuation.
3. Both the buyer and seller are acting prudently and knowledgeably.
4. The seller is under extreme compulsion to sell.
5. The buyer is typically motivated.
6. Both parties are acting in what they consider to be their best interests.
7. A normal marketing effort is not possible due to the brief exposure time.
8. Payment will be made in cash in U.S. dollars (or the local currency) or in terms of financial arrangements comparable thereto.
9. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.” defines

Answer 19

Liquidation value

Question 20

“The price expected for a whole property, e.g., a house, or a part of a property, e.g., a
plumbing fixture, that is removed from the premises usually for use elsewhere.” defines

Answer 20

Salvage value