Value can have several meanings in the valuation of a real estate, the conditions used depend on the context and usage. In sales, value is usually seen from how much profit can be generated in the future. Because values change over time, an appraiser determines the value for a certain period of time. Value at that time is the value of money from property, goods, and services to buyers and sellers. To avoid confusion, appraisers not only use one term of value, but they also refer to market value, use value, investment value, tax value, and several other types of value. Most of the property appraisal assignments have the main purpose of knowing the market value and the valuation results are the objectives of the appraisers.
Price: The amount agreed to be paid by the buyer and the amount of money received by the seller in accordance with the agreement in the transaction by both parties.
Costs: Total expenditure of money for repairs (structure), including for production, not exchange (price). Assessors distinguish between direct (hard) costs, indirect costs (soft), and entrepreneurial coordination costs.
1. Value of money from property goods or services for buyers and sellers at a certain time
2. Current prices are calculated from the benefits that can be obtained in the future for property ownership rights.
For assessors, the term value is sometimes inappropriate. Valuers are more likely to refer to certain types of values rather than using just one type of value.
The concept of Market Value is the most important thing in the business and real estate community. The amount of debt and equity capital has a periodic influence on real estate investments and mortgage loans, which are based on the valuation of market values. Taxation, litigation, and real estate legislation are also very influential in terms of market value. In essence, every aspect of the real estate industry and its regulations at the local, state and city level, market value considerations have considerable influence on economic stability.
There are a number of Market Value provisions in the United States and in other countries. Although the words used are not the same, but they have a similar concept of understanding. Because most valuations are used by third parties, not by the client itself, the use of appraisal services will determine the market value provisions that will be used in a particular valuation assignment. Desires or instructions from a client cannot change things that are fundamental, where an appraiser must use the appropriate Market Value provisions in carrying out their duties. Appraisers must really understand the reasons for applying certain Market Value provisions, and apply them according to established standards, and convey all matters relating to a client they serve.
Although there are differences of opinion in some respects regarding the provisions of market value, it is generally agreed that Market Value is produced from several evaluations of the markets used as a reference. Opinions about market values must be based on objective observations of market trends. Because the standard reference for this activity is cash, the increase or decrease in Market Value caused by financing and other forms of sales is not measured in terms of cash value.
The following provisions incorporate the concepts that are most widely accepted, such as willing, capable and knowledgeable buyers and sellers who make deals on a specific date and this provides three basic types of choices for an appraiser: all cash, other forms of cash equivalent, or in other forms mutually agreed. This provision also requires all forms of increase or decrease in cash market value to be calculated in cash.
Market Value is the main focus of most real property valuation assignments. Economic and legal provisions concerning market values have been developed and perfected. Continuous improvement is very important for the profession of an appraiser.
Various Market Value provisions have been developed by The Appraisal Foundation, Federal Government, International Appraisal Standards Committee, Appraisal Institution, and others.
The most appropriate price for a certain period of time, either in cash or in other forms equivalent to cash, or in another form that has been mutually agreed upon, where the property rights in question must be offered at a fair price in market competition, under any circumstances that support sales, where the buyer and seller each act consciously, understand well, and act of their own volition, without coercion or pressure from any party.
Some appraisers use these provisions directly in their valuation reports and provide a separate statement that the value is expressed in cash, or in another form equivalent to cash, or in other agreed forms. There are also appraisers who only change parts of the value provisions – for example, they can replace “in cash” with “in other forms the value of which is equivalent to the cash amount” or “as stated below” as appropriate. The use of this provision represents the concept of value in a transaction.
Among the available methods, the valuation of real estate by market value is the most used . This article explains how this valuation works