The Types Of Values Sought With An Appraisal

Oct 21, 2021 | Published by 1 Comment

A real estate appraisal develops an opinion on the value of a property. Most often, the use is to determine the market value of a home for a buyer and seller. However, because no two properties are alike and they may serve different needs such as a commercial space versus a home, there are different types of values sought with an appraisal.

In order to determine what type of value you seek with your appraisal, take a look at some of the varying types.

Some of the most common include:

  • Market Value – This is the estimated value for which a property could exchange between a buyer and seller. This type of transaction is most often one done with open knowledge between two parties regarding the property’s value.
  • Value-in-use – This is 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 –This is the value an investor may purchase a property for and if oftentimes higher than a market value.
  • 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 time-frame.

There are also several approaches to determining the fair market value of a property such as: The  cost approach, sales comparison approach and income approach.

We’ll save an explanation of what those are for our next blog, so stay tuned!

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This post was written by Joseph Castaneda

1 Comment

  • S. Havemeyer says:

    If a property is state/government owned and the state is willing to sell a portion to an abutter, and the land is fully land-locked, what kind of value would you be appraising for the abutter? The state requires an appraisal. The state of course puts an insanely high price on the property as no one but the abutter could access it. Although the land does not generate income (abuts, say, a freeway or access road and the portion to be sold will NOT abut said freeway or access road), is that value-in-use? In other words, it could only have value to the abutter. There is no open market for it.

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