CPV Asset Valuation Practice II key terms

The reasonably probable, legally permissible, physically possible, and financially feasible use of a property that produces the highest present value. It frames the valuation premise for land and improved property.

The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, with buyer and seller acting prudently and knowledgeably, price unaffected by undue stimulus.

The net amount a seller could reasonably expect to realize from a forced or orderly disposition within a limited marketing period, often below market value because of time constraints or compulsion.

The estimated gross amount a seller could realize from a sale under orderly liquidation conditions, with a reasonable marketing period and a knowledgeable buyer, but not the full exposure of fair market value.

The estimated gross amount realizable from a sale conducted under duress, typically at auction with a short exposure period, where buyers are limited and prices reflect urgency.

A valuation method that estimates value by analyzing recent arm's-length sales of similar properties and adjusting for differences in characteristics, location, condition, and transaction terms.

A valuation method that converts anticipated future income into present value using a capitalization rate or discounted cash flow analysis, reflecting risk and return expectations.

A rate expressing the relationship between a property's net operating income and its value, derived from market evidence and used to convert a single year's income into an indication of value.

Effective gross income minus operating expenses, excluding debt service, income taxes, depreciation, and capital expenditures. It is the income stream capitalized in direct capitalization.

A technique projecting periodic cash flows and a reversion, then discounting them to present value at a rate reflecting risk, used for properties with uneven or growth-oriented income.

A valuation method estimating value as the current cost to reproduce or replace improvements, less depreciation, plus the value of the land as if vacant.

The current cost to construct a building with equivalent utility using modern materials and methods, as opposed to replicating original construction exactly.

The current cost to construct an exact replica of a property using the same materials, design, and workmanship, often used for historic or specialized structures.

Loss in value from wear and tear, age, and deferred maintenance, curable or incurable, measured by comparing condition to new or by observed deficiency.

Loss in value because a property's design, layout, or technology is outdated or inadequate relative to market expectations, whether curable or incurable.

Loss in value caused by factors outside the property itself, such as neighborhood decline, adverse zoning, or economic conditions, generally incurable by the owner.

In appraisal, the difference between replacement or reproduction cost new and present value, encompassing physical deterioration, functional obsolescence, and external obsolescence.

The period over which a property or asset is expected to generate income or contribute value, ending when improvements no longer add value to the land or operation.

The estimated period during which an asset will continue to perform its intended function profitably, used to allocate depreciation and plan replacement.

A tabular analysis comparing a subject property to comparable sales, listing elements of comparison and applying percentage or dollar adjustments to derive an indicated value.

The specific date as of which the value opinion applies, which may differ from the report date and governs the market conditions and data considered.

The type and extent of research, analysis, and reporting required to produce credible assignment results, determined by the appraiser based on the intended use and user.

The purpose for which an appraisal is prepared, such as lending, litigation, financial reporting, or acquisition, which shapes the scope of work and reporting requirements.

A stated assumption about a condition that, if found false, could alter the appraiser's opinion or conclusion, used when information is uncertain but necessary.

A condition contrary to what actually exists at the effective date, assumed for analysis or illustration, such as a proposed construction or altered zoning.

The price at which property would change hands between a willing buyer and willing seller, neither under compulsion, both having reasonable knowledge of relevant facts, often used in tax and litigation contexts.

The estimated amount that could be realized from selling an asset or its components for scrap or reuse after it is no longer useful in its current operation.

The value of an asset solely for its material content when dismantled, typically the lowest value premise and relevant to disposal or abandonment decisions.

The period over which an asset is expected to continue contributing value to its owner, distinct from physical life and central to depreciation and obsolescence analysis.

A statistical model describing the rate at which groups of similar assets retire or are replaced over time, used to estimate average service life and depreciation.

The required return on invested funds, blending debt and equity costs, used as a discount rate in income-based business and asset valuations.

A blended discount rate weighting the after-tax cost of debt and cost of equity by their proportions in the capital structure, commonly applied in enterprise valuation.

The total value of a business's operating assets, including equity and interest-bearing debt, representing the value of the going concern before financing structure is considered.

The value of a business as an operating entity with assembled assets, workforce, and customer relationships, exceeding the sum of its individual assets in liquidation.

An intangible asset arising from reputation, customer loyalty, brand, and workforce that generates earnings beyond a normal return on identifiable tangible and intangible assets.

In financial reporting, the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

A laboratory report documenting a gemstone's identity, weight, dimensions, and grading of color, clarity, and cut, often issued by a recognized gemological laboratory and central to jewelry valuation.

The grading framework for diamonds and colored stones: color, clarity, cut, and carat weight, which together drive market value and comparability.

The standard unit of mass for gemstones, equal to 200 milligrams, with price per carat rising disproportionately at larger sizes for fine-quality stones.

Tangible or intangible property that is movable and not classified as real property, including machinery, equipment, inventory, and intangibles such as trademarks.

Personal property attached to real property by a tenant for business use that remains removable, with classification affecting which interest is valued.

Tangible personal property used in production, processing, or service operations, valued considering installation, condition, utilization, and market demand for the specific asset type.