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 statement best defines a hypothetical condition under USPAP?
According to the Competency Rule, if an appraiser lacks the knowledge and experience to complete an assignment competently, which action is NOT acceptable?
An appraiser runs only the sales comparison approach on a standard tract home and omits the cost and income approaches. Under Standard 1 this is:
A value opinion for a subdivision as if fully built out two years from now is what kind of assignment, and what does it require?
A hypothetical condition differs from an extraordinary assumption in that a hypothetical condition:
An appraiser must disclose in the certification whether they have:
A client-imposed requirement — 'use only comps from our approved list' — is best described as:
Under Standard 1, when developing a real property appraisal, an appraiser must:
The certification required by Standards Rule 2-3 must be signed by:
According to Standard 1, when developing an opinion of market value, an appraiser must analyze:
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