Certified Residential Appraiser Practice Exam

Investment value relates to:

1. The overall market value of a property

2. The value to a specific investor based on personal criteria

3. The cost to replace a property

4. The potential income generated by a property

The correct answer is: The value to a specific investor based on personal criteria

Investment value specifically refers to the worth of a property to a particular investor, taking into account their individual circumstances, expectations, and investment criteria. This value can vary significantly between different investors due to differing personal financial situations, risk tolerances, investment goals, and the specific ways an investor plans to utilize the property. For instance, one investor might see significant value in a rental property for its cash flow potential, while another might value the same property more for its potential appreciation in a growing market. The unique perspectives and criteria of individual investors lead to variations in evaluated worth, which is why investment value is defined as the value to a specific investor rather than a universal or market-wide price. In contrast, the overall market value of a property represents a more generalized assessment that reflects how much the property is worth in the market at any given time, which is not personalized. The cost to replace a property focuses on the expenses incurred to recreate the property rather than its unique investment value relative to an investor's objectives. Similarly, while the potential income generated by a property can influence an investor's decision-making, it is just one aspect of the broader personalized evaluation that defines investment value.