Module 8 The Nature of Value Flashcards
Distinguish among cost, price and value
Cost is a fact
Price is the amount asked, offered or paid for a property
also a fact and once stated it becomes a historical fact
Value is never a fact; it is an opinion of the present worth of the future benefits that accrue to real property ownership
Identify the four factors that create value
Utility
Scarcity
Desire
Effective purchasing power
Types of Cost
The total dollar expenditure to develop an improvement. 3 Categories of Cost -Direct Cost -Indirect Costs -Entrepreneurial Incentive
Price
Price is the amount asked, offered or paid for a property
also a fact and once stated it becomes a historical fact.
May or may not have any relation to the value attributed
to a particular property
Value
The monetary relationship between properties and those who buy,
sell or use those properties
Never a fact; it is an opinion of the present worth of the future
benefits that accrue to real property ownership
Utility
In order for something to have value, it must have utility in the mind of the person who intends to use it or benefit from it. Real property must have utility to satisfy specific needs and desires such as the following:
a) Basic Shelter
b)Ability to generate income for commercial properties
c)Both of the above apply in farm properties
Utility can be found in design features called amenity
Amenity
A tangible or intangible benefit of real property that enhances its attractiveness or increases the satisfaction of the user
Scarcity
The present or anticipated undersupply of an item relative to the demand for it. Conditions of scarcity contribute to value
Desire
A purchasers wish for an item to satisfy human needs or individual wants beyond essential life support needs
Effective Purchasing Power
The ability of an individual or group to participate in a market to acquire goods and services with cash or its equivalent
Use Value
The value a specific property has under a specific use
Value in Use
the value of a property assuming a specific use, which may or may not be the properties 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
Investment Value
it is not market value for an investment property. Instead, it is the value of an investment property to a particular investor based on their investment requirements. So you need to remember that investment value it is not based on what the typical purchaser would pay for an income-producing property. Instead, it is very specific to the individual investor (or class of investors) that is interested in a specific property
A goods capacity to satisfy human desires or needs is known as A) Effective demand B) Functional obsolescence C) Creative demand D) Utility
D) Utility
The value based on ad valorem tax rolls is called \_\_\_\_\_\_\_\_\_\_ value. A) Fair B) Investment C) Market D) Assessed
D) assessed
