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Appraisal Definitions
- FMV - Classic definition
- The term "Fair Market Value" is defined as the amount in terms of money at which the property would exchange in the current real estate market, between a willing buyer and a willing seller, neither being under compulsion to buy or to sell, both having reasonable knowledge of all relevant facts, and with equity to both.
- FMV - Orderly Liquidation
- The term "Fair Market Value in Orderly Liquidation" is defined as the amount that might be realized from assembled or piecemeal disposition of the property in the secondhand market, assuming a reasonable period of time (usually more than three months) in which to complete the transaction. The liquidation value estimates consider that the property will be offered for sale in its present location and condition on an "as is, where is" basis, with the potential buyer to assume cost, if any, to dismantle and remove.
- FMV - Forced Liquidation
- The term "Fair Market Value in Forced Liquidation" is defined as the amount that might be realized from assembled or piecemeal disposition of the property in the secondhand market, assuming a short period of time (usually less than three months) in which to complete the transaction. The liquidation value estimates consider that the property will be offered for sale in its present location and condition on an "as is, where is" basis, with the potential buyer to assume cost, if any, to dismantle and remove.
- FMV - Continued Use
- Fair Market Value in Continued Existing Use is defined as the
estimated amount at which the subject assets in their continued use might be expected
to be purchased and sold between a willing buyer and a willing seller, neither being
under compulsion, each having a reasonable knowledge of all relevant facts and with
equity to both, and contemplating the retention of the assets in their present existing use
for the purpose they were designed and built as part of an on-going business, but
without specific reference to earnings, and is expressed as subject to adequate
potential profitability of the undertaking. Synonymous with the accounting and/or
insurance industry term of Sound Value.
- FMV - Prompt Sale (For RE only, same as FMV - Forced Liquidation)
- The term "Fair Market Value - Prompt Sale" as used herein is defined as the amount at which the property might be sold in the real estate market considering a relatively short period of time in which to complete the transaction.
- Cost of Reproduction, New (For complete RE and ME appraisals)
- Cost of Reproduction, New is the estimated amount of money needed to acquire in like kind and in new condition an asset or group of assets, taking into consideration current prices of materials, labor, manufactured equipment, contractor's overhead, profit and fees, and all other attendant costs associated with its acquisition and installation in place, but without provision for overtime or bonuses for labor, and premiums for materials.
- Sound Value
- Sound Value is Cost of Reproduction, New and/or Cost of Replacement, New less accrued depreciation as evidenced by the observed condition in comparison with new units of like kind, tempered by consideration given to extent, character and utility of the property which is to be continued in its present use as part of a going concern, but without specific relations to earnings.
- Fair Rental Value
- The term "Fair Rental Value" is defined as the amount of money in which a willing lessee would pay and a willing lessor would receive for the use of certain property, neither being under compulsion to transact, and both having reasonable knowledge of all relevant facts.
- Lessee's Interest
- The term "Lessee's Interest or Leasehold Value" is the value of the leasehold interest, that is, the right to the use, enjoyment, and profit existing by virtue of the rights granted under a lease instrument. The value of a leasehold interest is the present (discounted) worth of the rent savings, when the contractual rent at the time of appraisal is less than the current market rent.
- Lessor's Interest
- The term "Lessor's Interest" defined as:
- a) The right to receive the rent provided for under the lease;
b) The right to repossession of the land at the termination of the lease,
that is, the right of "reversion"; and
c) The right to any adjustments for the improvements at the end of the lease.
Briefly defined, it is the Leased Fee. The present (discounted) value of the contract (lease) rent/s in addition to the present (discounted) value of the reversion. Or it is the interest remaining in one who has granted possession and occupancy to another for a designated term under a lease contract. Generally, it is the interest of the owner in his property after it has been leased.
- Salvage Value (For RE)
- The term "Salvage Value" is defined as the estimated amount of money that might be realized from piecemeal disposition of the useable property/parts/ materials in the secondhand market, with the buyer assuming all costs for dismantling on an "as is-where is" basis, including removal of all debris from site.
- Salvage Value (For ME)
- The term "Salvage Value" as used herein is defined as the amount that could be realized from the sale of a dismantled asset, to be removed for use, wholly or in part, elsewhere.
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