According to USPAP’s definition of value, how is value always described in appraisal practice?
Correct Answer
C) As a qualified value, such as market value
USPAP comments that in appraisal practice value will always be qualified, for example market value, liquidation value or investment value. Price, cost and assessed value are different concepts.
Why This Is the Correct Answer
Option C is correct because USPAP's comment to the definition of value says that in appraisal practice value will always be qualified, for example market value, liquidation value or investment value. Naming the type of value tells users exactly what kind of opinion is being given.
Why the Other Options Are Wrong
Option A: As the price actually paid in the most recent sale
Option A, the price actually paid in the most recent sale, is wrong because price is a historical transaction amount, not a qualified value opinion.
Option B: As the cost to build the improvements new today
Option B, the cost to build the improvements new today, is wrong because cost is the expense of production, which can differ from value.
Option D: As the assessed value shown on the local tax roll
Option D, the assessed value on the local tax roll, is wrong because assessed value is set for property taxation and is not how USPAP describes value in appraisal practice.
Value wears a label
Value never appears bare in an appraisal; it carries a label such as market, liquidation or investment.
How to use: Use this image to pick the qualified-value answer on USPAP definition questions.
Exam Tip
Keep price (what was paid), cost (what it takes to build) and value (an opinion of a stated type) distinct.
Common Mistakes to Avoid
- -Treating the last sale price as the value
- -Equating replacement cost with value
- -Using assessed value as a substitute for market value
Concept Deep Dive
Analysis
This question tests USPAP's comment on the definition of value. USPAP states that in appraisal practice value is qualified by a type, such as market, liquidation or investment value. Price, cost and assessed value are separate concepts and are not how value is described.
Background Knowledge
USPAP distinguishes value from price and cost. Value is an opinion of the monetary relationship between property and those who buy, sell or use it, and it is stated as a specific type, such as market value. Identifying the type of value is part of defining the assignment.
Real-World Application
A client asks an appraiser for the value of a house. Before accepting, the appraiser confirms whether the client needs market value, liquidation value or another type, because each answers a different question.
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