A lender asks what a property would bring if sold without reasonable market exposure. Which value concept fits?
Correct Answer
D) Liquidation value
Liquidation value is the amount expected if property is sold without reasonable market exposure; market value presumes reasonable exposure. Forced liquidation value is the form presuming less than a reasonable period of exposure.
Why This Is the Correct Answer
Option D is correct because liquidation value is the amount expected if a property is sold without reasonable market exposure. That matches a lender asking what the property would bring in a quick sale.
Why the Other Options Are Wrong
Option A: Market value
Option A, market value, is wrong because market value presumes reasonable exposure to the market, which the question rules out.
Option B: Investment value
Option B, investment value, is wrong because it is the value to a particular investor based on that investor's requirements, not a quick-sale value.
Option C: Insurable value
Option C, insurable value, is wrong because it relates to the portion of a property covered by an insurance policy, not a sale under limited exposure.
Short exposure, liquidation value
If the property cannot get a normal time on the market, think liquidation value rather than market value.
How to use: Use this cue when a stem mentions a quick or limited-exposure sale.
Exam Tip
Look for exposure language in the stem; reasonable exposure points to market value and its absence points to liquidation value.
Common Mistakes to Avoid
- -Reporting market value when the client needs a quick-sale value
- -Confusing investment value with liquidation value
- -Failing to state the exposure assumption
Concept Deep Dive
Analysis
This question tests the difference between market value and liquidation value. The key phrase is sold without reasonable market exposure, which defines liquidation value. Market value assumes reasonable exposure, and the other options are different value types.
Background Knowledge
Different types of value answer different questions. Market value assumes reasonable exposure and typical motivation, while liquidation value assumes a sale without reasonable exposure. Forced liquidation value is a further form that presumes less than a reasonable exposure period.
Real-World Application
A lender preparing for a possible foreclosure asks an appraiser what a property would bring if sold quickly. The appraiser develops a liquidation value and clearly states the assumed limited exposure.
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