“The word value is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used.” Justice Oliver Wendell Holmes (United States Supreme Court, in Towne Vs. Eisner, 245 U.S. 418)
Value from the above quotation is not inherent or intrinsic in an object, existing independently as in a vacuum, but the value is created by, and varies with, changing factors in this relationship; therefore, for an object to have value, it must possess the following attributes.
Attributes of Value
- Utility – ability to satisfy want.
- It must be capable of ownership.
- It must be transferable.
- There must be some degree of scarcity in its supply.
- There must be some expectation of future returns in using the object.
- It must be desired
- The desire must be backed by effective purchasing power.
- The object must be in an environment of law and order.
“Value” – In Real Estate Profession
There is often confusion in the minds of recipients of appraisal reports regarding the meaning of the figure set out in the report because the value to many people means both price (value in exchange) and worth (value in use).
Scholars and professionals have various arguments to support their thoughts on the two. For clarity’s sake, those who provide real estate appraisal services would adopt the following definitions.
PRICE – is the actual observable exchange price in the open market.
VALUE– is the estimate of the price that would be achieved if the property were sold in the market.
WORTH – is a specific investor’s perception of the capital sum that he would be prepared to pay or receive for the stream of benefits that he anticipates or expects to be produced by the investment.
Real estate valuation involves not just land and buildings; ownership rights (real property) are the object of value estimation. The rights in real property are inherently valuable interests. An appraisal assignment primarily seeks to establish market value. However, other values such as use value, investment value, assessed value, business value, and insured or insurance value could also be the reason for seeking an appraisal.
Our valuation experts at Veritas Realty Advisors are available to provide unbiased and objective analysis of any use for which you need an appraisal. Let us put our knowledge of real estate asset class and market to work for you.
About Yomi Omotoso
Yomi Omotoso, MAI, RES, is the Principal Appraiser at Veritas Realty Advisors. He provides expertise in property valuation, litigation, feasibility appraisal, investment/development advice, and analysis of complex valuation issues, including but not limited to historic preservations, contaminated land, air rights, site selection analysis, and eminent domain. Yomi is a Certified General Appraiser in the State of Maryland. He holds a Master of Science (MSc) in Real Estate from Johns Hopkins University, Baltimore, Maryland, a Bachelor of Science (BSc) in Estate Management from the prestigious Obafemi Awolowo University, Ile-Ife, Nigeria, and National and Higher National Diplomas from The Polytechnic Ibadan, Nigeria.
Contact Yomi at (240) 855-5628, or yomotoso@veritasreadvisors.com