Real Estate Appraisal Practice Exam

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What does the term “market value” represent in real estate?

The estimated amount a property can be sold for in a distressed sale

The estimated amount for which a property should exchange in a competitive market

The term "market value" in real estate signifies the estimated amount for which a property should exchange in a competitive market, assuming an arms-length transaction. This definition is grounded in the principles of supply and demand, where buyers and sellers interact under normal market conditions without undue pressure or special circumstances affecting the sale. Market value reflects the optimal price that a property would fetch if both parties are motivated but not compelled to transact, thus driving a balanced agreement that reflects prevailing market trends.

This concept assumes a full understanding of the property by both parties involved and considers factors like comparable sales, market conditions, and property attributes to arrive at a fair valuation. Unlike other interpretations of value, market value stipulates that the transaction occurs in a normal, competitive environment where information is freely available, and neither party is under atypical duress that could skew the pricing.

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The inherent value of a property regardless of market conditions

The maximum price a buyer is willing to pay for a property

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