The term is commonly used in
real estate appraisal, since real estate markets are generally considered both informationally and transactionally inefficient. Also, real estate markets are subject to prolonged periods of disequilibrium, such as in contamination situations or other market disruptions. Appraisals are usually performed under some set of assumptions about transactional markets, and those assumptions are captured in the definition of value used for the appraisal. Commonly, the definition set forth for U.S. federally regulated lending institutions is used, although other definitions may also be used under some circumstances: :"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or
creative financing or sales concessions granted by anyone associated with the sale." In the US, licensed or certified appraisers may be required under state, federal, or local laws to develop appraisals subject to USPAP
Uniform Standards of Professional Appraisal Practice. The
Uniform Standards of Professional Appraisal Practice requires that when market value is the applicable definition, the appraisal must also contain an analysis of the highest and best use as well as an estimation of exposure time. All states require mandatory licensure of appraisers. USPAP does not require that all real estate appraisals be performed based on a single definition of market value. There are frequent situations when appraisers are called upon to appraise properties using other value definitions. If a value other than market value is appropriate, USPAP only requires that the appraiser provide both the definition of value being used and the citation for that definition.
Other definitions Market value is the most commonly used type of value in real estate appraisal in the United States because it is required for all federally regulated mortgage transactions, and because it has been accepted by US courts as valid. However, real estate appraisers use many other definitions of value in other situations.
Liquidation value Liquidation value is the most probable price that a specified interest in real property is likely to bring under all of the following conditions: • Consummation of a sale will occur within a severely limited future marketing period specified by the client. • The actual market conditions currently prevailing are those to which the appraise property interest is subject. • The buyer is acting prudently and knowledgeably. • The seller is under extreme compulsion to sell. • The buyer is typically motivated. • The buyer is acting in what he or she considered his or her best interest. • A limited marketing effort and time will be allowed for the completion of the sale. • Payment will be made in cash in U.S. dollars or in terms of financial arrangements comparable thereto. • The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Orderly liquidation value This value definition differs from the previous one in that it assumes an orderly transition, and not "extreme compulsion".
Federal land acquisition For land acquisitions by or funded by U.S. federal agencies, a slightly different definition applies: :"Fair market value is defined as the amount in cash or terms reasonably equivalent to cash, for which in all probability the property would be sold by a knowledgeable owner willing but not obligated to sell to a knowledgeable purchaser who desired but is not obligated to buy. In ascertaining that figure, consideration should be given to all matters that might be brought forward and reasonably be given substantial weight in bargaining by persons of ordinary prudence, but no consideration whatever should be given to matters not affecting market value."
Going concern value When a real estate appraiser works with a
business valuation appraiser (and perhaps an equipment and machinery appraiser) to provide a value of the combination of a business and the real estate used for that business, the specific market value is called "
going concern value". It recognizes that the combined market value may be different from the sum of the separate values: "The market value of all the tangible and intangible assets of an established operating business with an indefinite life, as if sold in aggregate."
Use value Use value takes into account a specific use for the subject property and does not attempt to ascertain the highest and best use of the real estate. For example, the appraisal may focus on the contributory value of the real estate to a business enterprise. Some property tax jurisdictions allow agricultural use appraisals for farmland. Also, current IRS estate tax regulations allow land under an interim agricultural use to be valued according to its current use regardless of development potential. ==Economic value and investor confidence==