THE HONEST BROKER : DIFFERENCES IN VALUE

THE HONEST BROKER : DIFFERENCES IN VALUE

When people are selling their homes, they are thinking… “What is my house worth?” However, there are many facets of worth and value; assessed value, insurable value, investment value, liquidation value, salvage value, value in “use”, and finally, market value. I will concentrate on just a few of these concepts for this week; assessed investment, liquidation and market.

Assessed value is the value established for property tax purposes and calculated in relation to a market value base. However, assessed value typically does not equal market value and is based on the purchase price of the home and the local tax offices’ “millage” rate.

Investment value is the value of an investment to a particular investor based on requirements regarding rate of return, management involvement, risk, and other factors. This is of concern to those dealing in real estate for business purposes.

Liquidation value is the amount a property most likely will bring at a forced or hurried sale. It is sometimes used in valuing foreclosed properties and properties subject to tax liens.

Lastly, we will discuss market value which is the “most probable price for which a property should bring in a competitive and open market under all conditions to a fair sale under which the buyer and seller each acting in good faith, are knowledgeable and assume the price is not affected by any undue stimulus.” This occurs when the buyer and seller are typically motivated, both parties are well informed and well advised and are acting in their own best interests. Also that there has been reasonable amount of time allowed for exposure of the property in the open market. In effect, 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.