Price, cost and value are distinguished in appraisal because:
Correct Answer
A) Price is what was paid, cost is what creation takes, value is what is probable
Why this is correct: In appraisal, price is a historical fact (what was paid), cost is an expenditure to create or reproduce, and value is an opinion of the most probable price under market conditions. These three often differ. Why the other choices are wrong: "The three terms are interchangeable" is false; distinguishing them is fundamental. "Only cost can ever be objectively measured" is incorrect; price is also objective, but value is an opinion. "Price and cost apply to land while value applies only to improvements" is wrong; all three apply to the whole property. Exam tip: Price = past transaction. Cost = to build. Value = probable future price.
Why This Is the Correct Answer
Why this is correct: In appraisal, price is a historical fact (what was paid), cost is an expenditure to create or reproduce, and value is an opinion of the most probable price under market conditions. These three often differ. Why the other choices are wrong: "The three terms are interchangeable" is false; distinguishing them is fundamental. "Only cost can ever be objectively measured" is incorrect; price is also objective, but value is an opinion. "Price and cost apply to land while value applies only to improvements" is wrong; all three apply to the whole property. Exam tip: Price = past transaction. Cost = to build. Value = probable future price.
More USPAP Questions
Which type of appraisal report may contain the appraiser's analyses, opinions, and conclusions but is intended for use by the client only?
How long must an appraiser retain the workfile for an appraisal assignment under USPAP?
If an appraiser uses a hypothetical condition that the subject property is 10% larger than it actually is, this must be:
Under Standard 1, when developing a real property appraisal, an appraiser must:
An appraiser accepts an assignment to appraise a specialized industrial property but has never appraised this property type before. To comply with the Competency Rule, the appraiser:
According to the Scope of Work Rule, the scope of work must be appropriate to the:
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A lender emails: 'We need at least $450,000 to make this loan work — can you take the assignment?' Accepting on that basis is:
An appraiser is developing an opinion of market value for a 20-unit apartment building. The appraiser finds three comparable sales with the following information: Sale 1: 18 units, sold for $1,800,000; Sale 2: 22 units, sold for $2,200,000; Sale 3: 24 units, sold for $2,280,000. What is the average price per unit for these comparables?
In developing a scope of work, an appraiser must consider all of the following factors EXCEPT:
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