Market value is the present worth that a commodity can draw on the open market.
The original cost of an item has no relevance to its value.
Cost is defined as the actual dollars spent to produce an asset.
The Four Essential Elements of Value are:
1. Scarcity: How much is there of it?
2. Transferability: Can it be sold?
3. Utility: Can it be used?
4. Demand: Does anybody want it?
Just think of the acronym "STUD".
Market price is the actual selling price of the property. Market value, cost, and market price could be the same, but they seldom are. For example, using the market data approach, an appraiser determined that the market value of a property is $175,000. But under the cost approach, it would cost $190,000 to rebuild the property. The property sold for $200,000, which makes the market price $200,000, because that's what somebody was willing to pay.
The appraiser is hired to determine the market value of the property, not the price of the property.
Assemblage and Plottage
Two ways to increase value are through assemblage and plottage. Assemblage is the combining of two or more parcels, usually but not necessarily contiguous, into one ownership or use. Plottage is an increment of value arising as a result of combining two or more sites to develop one site having a greater utility than each when separately considered.
An appraiser is paid according to the time involved, not the percentage of the sale price of the property. The appraiser must be neutral.