Certified Residential Appraiser Practice Exam

Which concept reflects cash obtainable for an asset under market conditions?

1. Value in Use

2. Market Value

3. Functional Utility

4. Investment Value

The correct answer is: Market Value

The concept that reflects cash obtainable for an asset under market conditions is known as Market Value. Market Value is defined as the price at which an asset would sell in a competitive and open market under all conditions requisite to a fair sale. This value takes into account the current market conditions and the interactions of buyers and sellers. It is the most relevant measure when considering real estate and other assets, as it represents what the property would realistically sell for, not just what it might be worth to a specific user or investor. In contrast, Value in Use pertains to the specific utility or benefit that a particular asset provides to its owner, which may differ significantly from its Market Value. Functional Utility focuses on how well an asset meets the needs of the user, while Investment Value refers to the value that particular investors place on an asset, often based on their personal investment criteria. These concepts are important in real estate valuation but do not capture the general cash obtainable in the market as accurately as Market Value does.