Certified Residential Appraiser Practice Exam

What type of value is associated with liquidation or disposal of an asset?

1. Investment Value

2. Market Value

3. Value in Exchange

4. Value in Use

The correct answer is: Value in Exchange

The type of value associated with liquidation or disposal of an asset is best described as Value in Exchange. This concept refers to the value that can be realized when an asset is sold or exchanged under circumstances where the seller must dispose of the asset quickly, often at a lower price than its full market value. In situations of liquidation, the primary focus is on the immediate financial return from the sale rather than on the asset's highest potential value in regular market conditions. This may occur due to financial distress or urgent need for cash, which typically results in the asset being sold for a value influenced by market demand at that moment rather than its intrinsic worth. Understanding the distinction between this type of value and others is crucial. For instance, Market Value generally refers to the price an asset would fetch in an open and competitive market under normal conditions, which may not apply in a liquidation scenario. Similarly, Investment Value focuses on the specific worth to an individual investor, often based on their personal criteria and circumstances. Value in Use relates to the value derived from an asset's specific use to a particular owner, which may differ significantly from the value achieved through a quick sale. Thus, recognizing that Value in Exchange captures the essence of selling an asset under forced circumstances helps clarify