Ch.2: The Nature Of Value

Front 1

4 factors that create value:

Back 1

1. Utility

2. Scarcity

3. Desire

4. Effective Purchasing Power

Front 2

Utility

Back 2

The ability of a product to satisfy a human want, need, or desire.

Front 3

Scarcity

Back 3

The present or anticipated undersupply of an item relative to the demand for it.

Front 4

Desire

Back 4

A purchaser's wish for an item to satisfy human needs (eg. shelter, clothing, food, companionship) or individual wants beyond essential life-support needs.

Front 5

Effective Purchasing Power

Back 5

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

Front 6

Market Value

Back 6

*Varying definitions

"The most probable price which a property should bring in a competitive and open market as of the specified date 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 undue stimulus." (CUSPAP)

*Important to define on appraisal

Front 7

Fair Value

Back 7

"The amount of consideration that would be agreed upon in an arm's length transaction between knowledgeable, willing parties who are under no compulsion to act." (CICA)

Front 8

Use Value

Back 8

Use value is the value a specific property has for a specific use. In estimating use value, the appraiser focuses on the value the real estate contributes to the enterprise of which it is a part, without regard to highest and best use of the property or the monetary amount that might be realized from its sale.

Front 9

Investment Value

Back 9

The specific value of a property to a particular investor or class of investors based on individual investment requirements; distinguished from market value, which is impersonal and detached.

Front 10

Going Concern

Back 10

A "going concern" is an established and operating business with an indefinite future life.

Front 11

Business Value

Back 11

For certain properties, the physical real estate assets are integral parts of an ongoing business. The market value of such a property is commonly referred to as business value or business enterprise value, but in reality it is market value of the going concern including real property, personal property, and the intangible assets of the business.

Front 12

Public Interest Value

Back 12

Public interest value is driven by social, political, and public policy goals. It is not based on economic principles but on a non-economic highest and best use.

Front 13

Assessed Value

Back 13

The value of a property according to 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.

Front 14

Insurable Value

Back 14

The value of an asset or asset group that is covered by an insurance property; can be estimated by deducting costs of non insurable items (such as land value) from market value.