Valuation is
part of the appraisal process, and
is an estimated worth or price of a
real estate property, using methods
such as;
direct comparison approach, cost
approach, or
income approach.
Real estate appraisal,
property valuation or land
valuation is the practice of
developing an opinion of the value
of real property, usually its
Market Value. The need for
appraisals arises from the
heterogeneous nature of property as
an investment class: no two
properties are identical, and all
properties differ from each other in
their location - which is the most
important determinant of their
value.
There are several types and
definitions of value sought by a
real estate appraisal. Some of the
most common are:
Market Value – The
price at which an asset would
trade in a competitive Walrasian
auction setting. Market Value is
usually interchangeable with
Open Market Value or Fair
Value. International
Valuation Standards (IVS) define
Market Value as:
Market Value is
the estimated amount for
which a property should
exchange on the date of
valuation between a willing
buyer and a willing seller
in an arms-length
transaction after proper
marketing wherein the
parties had each acted
knowledgably, prudently, and
without compulsion.
Value-in-use – The
net present value (NPV) of a
cash flow that an asset
generates for a specific owner
under a specific use.
Value-in-use is the value to one
particular user, and is usually
below the market value of a
property.
Investment value - is
the value to one particular
investor, and is usually higher
than the market value of a
property.
Insurable value - is
the value of real property
covered by an insurance policy.
Generally it does not include
the site value.
Liquidation value --
may be analyzed as either a
forced liquidation or an
orderly liquidation and is a
commonly sought standard of
value in bankruptcy proceedings.
It assumes a seller who is
compelled to sell after an
exposure period which is less
than the market-normal timeframe
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