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DEFINITION
OF MARKET VALUE
The most probable
price which a property should bring in a competitive and 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 undue stimulus.
Implicit in this
definition is the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions
whereby:
- buyer and seller
are typically motivated;
- both parties
are well informed or well advised, and each acting in what
he considers his own best interest:
- a reasonable
time is allowed for exposure in the open market;
- payment is
made in terms of cash in U.S. dollars of in terms of financial
arrangements comparable thereto; and
- 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.
Substitution of
another currency for United States dollars in the fourth condition
is appropriate in other countries or in reports addressed
to clients from other countries.
Persons performing
appraisal services that may be subject to litigation are cautioned
to seek the exact legal definition of market value in the
jurisdiction in which services are being performed.
*Adjustments to
the comparables must be made for special or creative financing
or sales concessions. No adjustments are necessary for those
costs, which are normally paid by sellers as a result of tradition
or law in a market area; these costs are readily identifiable
since the seller pays these cost in virtually all sales transactions.
Special or creative financing adjustments can be made to the
comparable property by comparisons to financing terms offered
by a third party institutional lender that is not already
involved in the property transaction.
Any adjustment
should not be calculated on a mechanical dollar for dollar
cost of the financing or concession but the dollar amount
of any adjustment should approximate the market's reaction
to the financing or concessions based on the appraiser's judgment.
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