Resources

Value Definitions

07.04.2003

The following is a summary of values as defined by the Appraisers Association of America. The reader will see that there is some overlap between types of values and we, as the appraisers, often use a combination of values based on the purpose of the particular appraisal. We also do not necessarily totally agree with these exact definitions but have included them here for a preliminary overview of appraisal valuation.

Retail Replacement Value (RRV) – Highest Value (Usually for Insurance Purposes) is defined as the highest amount in terms of US dollars that would be required to replace a property with another of similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market. When applicable, sales and / or import tax, commissions and/or premiums are included in this amount. (NYU Appraisal Studies Program definition)

Auction Replacement Value (ARV) – (Usually for Insurance Purposes) is defined as a reasonable amount in terms of US dollars that would be required to replace a property with another of similar age, quality, origin, appearance, provenance and condition within a reasonable length of time in an appropriate and relevant auction market. Since the client regularly and routinely buys at suctions, he appraisers rarely examined the retail market. When applicable, sales and/or import tax, commissions and/or premiums are included in this amount.

Retail Value (Used to Establish a price Guideline for Retail Pricing) Appraise “retail value” is derived from “retail replacement value.” It is defined as a reasonable amount in terms of US dollars that would be required to purchase a property of similar age, quality, origin, appearance, provenance, and condition within a reasonable length of time in an appropriate and relevant market. Unlike “retail replacement value,” “retail value” does not include any fees or additional costs, such as taxes, framing, conservation, restoration, and additional commissions.

Fair Market Value (FMV) – Middle “Secondary Market” Value (Usually for IRS Purposes) as defined by IRS Section 1.170 and 20.2031 (b) is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having a reasonable knowledge of relevant facts.” According to Technical Advisory Memorandum 9235005 (May 27, 1992), fair market value should include the buyer’s premium.

20.201 (b) continues “the fair market value of an item of property includible in the decendents’ gross estate is not to be determined by the sale price of that item in a market other than that in which such item is commonly sold to the public, taking into account the location of the item wherever appropriate. Thus, in the case of an item of property includible in the market, fair market value of such an item of property is the price at which the item or a comparable item would be sold at retail.”

Marketable Cash Value MCV) – Middle/Low “NET” Value (Usually for Equitable Distribution, Resale or Estate Planning Purposes) is defined as the net value a willing seller realizes after disposing of property in a competitive and open market to a willing buyer. Both the buyer and seller must be reasonably knowledgeable of all relevant facts, and neither being under constraint to buy or sell. Marketable cash value takes into consideration insurance, dealer commissions, advertising, travel, and shipping expenses that may be involved in the sale.

Orderly Liquidation Value (OLV) – Low Range “NET” Value (Usually for Quick Sale Purposes) is defined as “the most probable price in terms of cash, or other precisely revealed terms, for which the property would change hands under required and limiting conditions in an orderly manner, generally advertised, with reasonable time constraints, in an appropriate and relevant marketplace, with knowledgeable buyer.”

Forced Liquidation Value (FLV) – Low Range “NET” Value (Usually for Quick and Forced sale Purposes) is defined as “the most probably price in terms of cash, or other precisely revealed terms, for which the property would change if sold immediately, without regard to relevant marketplace.” (ASA 1994 Handbook, p. 2)

Selvage Value (SV) – Rock Bottom Value – Can be a Negative Value (Usually for quick and forced Sale Purposes) is defined as the net price in terms of cash, or other precisely revealed terms, for which the property would change hands if sold immediately, without regard to relevant market place and appropriate use. In certain cases, this may be a negative value as labor and other costs mat be required to disassemble and dispose of the property in a quickly and expedient manner.