Chapter 2 - The Nature Of Value

Question 1

Ceiling Price

Answer 1

The purchasers top price.

Question 2

Floor Price

Answer 2

The sellers minimum price.

Question 3

Value of Exchange

Answer 3

Sale price

Question 4

Value to the Owner

Answer 4

Floor and ceiling prices. In this case the owner can be the purchaser (future owner) or the seller.

Question 5

Investment Value

Answer 5

An entity specific basis of value. It reflects the circumstances and financial objectives of the specific for which the valuation is being produced.

Question 6

Types of Subjective Values

Answer 6

Investment and Special Value

Question 7

Special Value

Answer 7

An amount that reflects the particular attributes of a real property asset that are only a value to a special purchaser.

Question 8

Types of objective values

Answer 8

Market value, insurable value, lending value, taxable value, assessed value, actual value, book value.

Question 9

Objective value

Answer 9

A number based on factual market evidence that could be verified by a third-party

Question 10

Subjective value

Answer 10

The value as it pertains to the buyer or seller (Owner). It’s value is completely hypothetical and based on the personal tastes, preferences, or biases of one specific individual.

Question 11

Assessed value (actual value)

Answer 11

A value set on real estate and personal property by a government as a basis for levying taxes. This may be higher or lower than market value or based on an assessment ratio that as a percentage of market value.

Question 12

Book value

Answer 12

Accountants list assets at their purchase price or cost of construction, with separate value sold for land and buildings. Over time, the original amount is reduce through depreciation, and modified by adding the value of any capital improvements – those that increase the value of the property or extend it’s remaining economic life

Question 13

Fair value

Answer 13

The estimated price for the transfer of an asset or liability between identified knowledgable and willing parties that properly reflects the respective interests of those parties

Question 14

Going concern value

Answer 14

A value that is tied to the business operation itself such as specifically designed buildings for a franchise restaurant (Burger King), bowling alley, hotel, etc.

Question 15

Hypothetical value

Answer 15

Value given two properties under construction or rezoned. It may be used when required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison. (“as if complete”)

Question 16

Insurable value

Answer 16

Refers to the undepreciated cost of replacement of the subject properties. This is required for property insurance or claims of loss purposes

Question 17

Lending value

Answer 17

The value establish to support the mortgage financing of the property. Often, the lending value is expressed as a percentage of market value, and establishes the upper limit of funds that a mortgagee would be prepared to lend

Question 18

Limited market and special use properties

Answer 18

An example of limited market is crownland that a government wishes to sell or lease. This land is often isolated but highly desirable for recreational use.

Question 19

Liquidation value

Answer 19

The most probable price that is specified interest in real property is likely to bring under all of the following conditions; 1.consumption of a sale will occur within a severely limited future marketing period specified by the client.

2. The actual market conditions currently prevailing are those two which the appraised property interest as subjects.
3. The buyer is acting prudently and knowledgeably.
4. The seller is under extreme compulsion to sell.
5. The buyer is typically motivated.
6. The buyer is acting in what here she considers his or her best interest.
7. A limited marketing efforts and time will be allowed for the completion of the sale.
8. Payment will be made in cash in US dollars or in terms of financial arrangements comparable there too.
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.

Question 20

Quick sale value (forced sale value)

Answer 20

A value resulting from a sale under compulsion, often involving a mortgage holder under a for closure for the marketing. It is a normally short

Question 21

Synergistic value

Answer 21

And additional element of value created by the combination of two or more interest that’s where the value of the combined interests worth more than the sum of the original interests

Question 22

Taxable value

Answer 22

The value established and defined by governments for tax situations such as for a state, capital gains or gift tax purposes

Question 23

Value in use/use value

Answer 23

The value of a property as it is currently used not its value considering alternative uses. This definition of value maybe used where legislation has been an acted to preserve farmland, Timberland or other open space land on urban fringes.

Question 24

Market value

Answer 24

Most probable price which a property should bring in a competitive an open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undo stimulus. [CUSP a P]

Question 25

Broker Price Opinion (BPO)

Answer 25

And opinion of value from the broker, or a lender believes the time and expense of an appraisal is not warranted

Question 26

Forced sale value (or liquidation value or quick sale value)

Answer 26

Value resulting from the sale under compulsion, often involving a mortgage holder under a for closure or a relocation, where the marketing is abnormally short.

Question 27

What are the four independent economic values that create value

Answer 27

Utility
Scarcity
Desire
Effective purchasing power

Question 28

What are two types of supply factors

Answer 28

Utility and scarcity.

Question 29

What are two types of demand factors?

Answer 29

Desire and effective purchasing power

Question 30

Utility

Answer 30

The ability of a product to satisfy a human want, need, or desire. All properties must have utility to tenants, owner investors, or owner occupants.

Question 31

Scarcity

Answer 31

The presence or anticipated under supply of an item relative to the demand for it. Conditions of scarcity contribute to value.

Question 32

Desire

Answer 32

Purchasers wish for an item to satisfy human needs (example; shelter, clothing, food, companionship) or individual dance beyond essential life support needs.

Question 33

Effective purchasing power

Answer 33

The ability of an individual or group to participate in a market, i.e., to acquire goods and services with cash or it’s equivalent.

Question 34

Real estate owned [REO] Value

Answer 34

The property that does not sell in for closure and ownership reverts to the mortgage holder; maybe an atypical motivated vendor.

Question 34

The four agents of production first identified in the classical school by economic thinkers were

Answer 34

Labor, capital, coordination, and land.

Question 34

Price

Answer 34

The amount of a particular purchaser agrees to pay at a particular seller agrees to except under the circumstances surrounding the transaction.
A price, once finalized, refers to a sale or transaction price it implies an exchange. Price is an accomplished fact.

Question 35

Cost

Answer 35

The term cost is used by appraiser is in relation to production, not exchange. Cost late either be an accomplished fact or a current estimate.

Question 36

Value

Answer 36

In the market place value is commonly perceived as the anticipation of benefits to be obtained in the future. Appraisal reflects value at a particular point in time. Value at the given time represents the monetary worth of property, goods, or services to buyers and sellers.

Question 37

Business value

Answer 37

The market value of an ongoing business including all tangible and intangible assets of the going concern, as if sold in aggregate.

Question 38

Public interest value

Answer 38

The general term covering a family of value concepts that relate the highest and best use of property to non-economic uses. This is driven by social, political, and public policy goals.

Question 39

Actual cash value

Answer 39

Replacement cost minus normal depreciation used primarily for insurance