M1U6S1

Question 1

Both the objective and subjective value concepts have a place in appraisal practice. Discuss…

Answer 1

The appraiser mainly uses the subjective value concept which affirms that value is created and exists only in the mind of the potential buyers, sellers, owners, and users of real estate. The objective value concept maintains that value is tied up in the cost of production or cost of creating the property

Question 2

Define market value

Answer 2

Refers to the highest probable price that a property will bring to an informed and willing seller if placed for sale on the open market; allowing a reasonable time to find a knowledgable and willing buyer, and with neither buyer nor seller acting under necessity

Question 3

Market value includes 4 basic assumptions; what are they?

Answer 3

1. An informed buyer and seller
2. Rational behaviour by both seller and buyer
3. No undue pressure on either party
4. A reasonable time is allowed to find a buyer

Question 4

Differentiate between market value and market price

Answer 4

Market value: represents an expected price that should result under specific market conditions
Market price: the amount that the property is actually sold for

Question 5

What are 9 principles of real property value?

Answer 5

Anticipation, 
balance,
change, 
competition, 
conformity, 
regression/progression, 
consistent use,
contribution, 
external factors,
highest and best use,
substitution, 
supply and demand, 
surplus productivity

Question 6

The basic fundamental principle underlying all valuation approaches is the principle of what?

Answer 6

Substitution

Question 7

The residual income from real estate to land is representative of the principle of what?

Answer 7

Surplus productivity