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Appraisal task force finds need for value definitions.

Market value is the foundation of the valuation discipline when properties sell at a normal rate, but under certain market conditions - particularly the current distressed market - this standard definition may not reflect the value needed for the transaction. Today's market requires that a different set of value definitions be adopted in response to unique market situations, according to a task force report commissioned by Appraisal Institute President Patricia J. Marshall, MAI.

Recommendations made in the Special Task Force Report on Value Definitions are expected to revolutionize appraisal practice and become the driving force for changing regulatory perspectives. The Appraisal Institute convened a blue ribbon panel of appraisers to address valuation issues and questions raised during two recent meetings involving the U.S. Department of the Treasury, regulators, lenders, developers, and private. industry groups. The report is being distributed to the participants and other appropriate entities for review and consideration.

The task force report concludes that different value definitions are essential to reflect what is actually happening in the marketplace. Adoption of these new definitions will help eliminate confusion in the lending process, according to the report. The task force focused on expansion and clarification of three value definitions: Market value, liquidation value, and disposition value. When typical transactions are vulnerable to duress or forced liquidation, disposition value or liquidation value may be needed to make a sound business decision, the report states. Where Market value is always "as of a specified date," disposition value envisions a future date when a transaction may be expected to occur and the seller is usually under some compulsion to sell. Liquidation value, on the other hand, reflects a "forced" sale of real property rights where a seller may or may not be acting prudently and knowledgeably.
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Title Annotation:Appraisal Institute releases Special Task Force Report on Value Definitions making recommendations for real estate appraisal
Publication:Real Estate Weekly
Date:Sep 23, 1992
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