Under the DEFINITIONS section of USPAP (2024 edition), how is Market Value defined?
Correct Answer
A) An opinion of value presuming a transfer as of a certain date under the conditions of the applicable value definition
The 2024 USPAP DEFINITIONS, paraphrased: Market Value is a type of value, stated as an opinion, that presumes the transfer of a property (a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the value definition that is identified by the appraiser as applicable. Comment cautions appraisers to identify the exact definition and its authority.
Why This Is the Correct Answer
Option A is correct because USPAP defines market value as a type of value, stated as an opinion, that presumes the transfer of a property as of a certain date under specific conditions set forth in the value definition identified as applicable. Option A captures each of those elements.
Why the Other Options Are Wrong
Option B: The price actually paid: once a sale closes, its market value equals that recorded price as a matter of fact
Option B, saying market value equals the price actually paid as a matter of fact once a sale closes, confuses price with value; market value is an opinion, and a sale price is a historical fact that may or may not reflect it.
Option C: The assessor’s assessed value, as defined for property taxation
Option C, the assessor's assessed value for property taxation, describes a tax figure set for assessment purposes, not the USPAP definition of market value.
Option D: The cost new of the improvements plus the land value, with no opinion or judgment involved
Option D, cost new of the improvements plus land value with no opinion or judgment involved, describes a cost figure and contradicts the definition, which states market value is an opinion.
Opinion, transfer, date, definition
Market value under USPAP is an Opinion that presumes a Transfer as of a Date under the conditions of the applicable Definition.
How to use: Use the four parts to check whether an answer choice states the USPAP definition of market value.
Exam Tip
Answers that equate market value with a recorded price, a tax value or a cost total are describing something other than market value.
Common Mistakes to Avoid
- -Equating sale price with market value
- -Treating assessed value as market value
- -Thinking market value involves no judgment
Concept Deep Dive
Analysis
This question tests the USPAP definition of market value. The definition treats market value as an opinion that presumes a transfer as of a certain date under the conditions of the value definition the appraiser identifies as applicable. Distractors confuse value with price, assessed value or cost.
Background Knowledge
Market value is an opinion of value tied to an effective date and to the conditions in a specific value definition. Because several published definitions exist, the appraiser must identify the exact definition used and its source. Price, cost and assessed value are related concepts but are not the same as market value.
Real-World Application
A home sold last month to a relative at a below-market price. The appraiser does not treat that price as market value; she analyzes the sale's conditions and other market evidence to form her opinion under the identified definition.
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