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Asset Appraisal Partners
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  • Our Professionals
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    • Services We Offer
    • Intended Uses & Users
    • Items We Appraise
    • Value Types
    • Process & Fees
  • CONTACT US

Value Types

VALUE TYPES COMMONLY USED IN OUR APPRAISAL REPORTING

  

Fair Market Value

Fair market value is defined in Treasury Regulation §1.170A-1(c)(2) as, “The price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.” Treasury Regulation §20.2031-1(b) expands upon this definition to say that, “Fair market value is not to be determined by a forced sale . . . nor is the fair market value of an item to be determined by a sale within a marketplace other than that in which the item would be most commonly sold to the public. . . taking into consideration the location of the item where appropriate.

Fair market value (FMV) is the price that a property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction. 

*IRS Publication 561


Fair Market Value - Installed

An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering market conditions for the asset being valued, independent of earnings generated by the business in which the property is or will be installed, as of a specific date. 

*American Society of Appraisers (ASA)


Fair Market Value - Removed 

An opinion, expressed in terms of money, at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts, considering removal of the property to another location, as of a specific date. 

*American Society of Appraisers (ASA)


Fair Value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. *Financial Accounting Standards Board (FASB Statement No. 157, 2007)


Marketable Cash Value

Orderly liquidation value minus cost associated with the sale. 

* Appraising Personal Property: Principles and Methodology, 9th edition


Net Value

Net value is similar to marketable cash value in that it reflects the gross proceeds less the anticipated costs associated with the sale; however, net value also takes into account any liens or other encumbrances on the property in question. Such encumbrances are subtracted from the marketable cash value to arrive at net value. 

* Appraising Personal Property: Principles and Methodology, 9th edition


Orderly Liquidation Value

An opinion of the gross amount, expressed in terms of money, that typically could be realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date. 

*American Society of Appraisers (ASA)


Forced Liquidation Value

An opinion of the gross amount, expressed in terms of money, that typically could be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an as-is, where-is basis, as of a specific date. 

*American Society of Appraisers (ASA)


Salvage Value

An opinion of the amount, expressed in terms of money that may be expected for the whole property or a component of the whole property that is retired from service for possible use elsewhere, as of a specific date. 

*American Society of Appraisers (ASA)


Scrap Value

An opinion of the amount, expressed in terms of money that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date. 

*American Society of Appraisers (ASA)


Replacement Value (NEW) 

The worth of an item based on the amount of money necessary to obtain (through purchase) a new substitute property that would provide the same enjoyment, usefulness, and other rights of ownership as did the subject property. Replacement value new is based on the substitute property’s replacement cost new. 

* Appraising Personal Property: Principles and Methodology, 9th edition


Replacement Value (COMPARABLE) 

The worth of an item based on the amount of money necessary to obtain a comparable substitute property that would provide the same enjoyment, usefulness and other rights of ownership as did the subject property. Replacement value comparable is based on the substitute property’s replacement cost comparable.  

* Appraising Personal Property: Principles and Methodology, 9th edition


Actual Cash Value (ACV) 

In property and auto physical damage insurance, one of several possible methods of establishing the value of insured property to determine the amount the insurer will pay in the event of loss. ACV is typically calculated one of three ways: (1) the cost to repair or replace the damaged property, minus depreciation; (2) the damaged property's "fair market value"; or (3) using the "broad evidence rule," which calls for considering all relevant evidence of the value of the damaged property. 

*International Risk Management Institute


Investment Value 

Current worth (of an investment property) that is the equivalent of payments or a stream of payments to be received at various times in the future. The investment value will vary with the discount interest factor applied to future payments. Investment value represents a series of future cashflows expressed in today's dollars. Investment value is based on the present worth of the property. 

* Appraising Personal Property: Principles and Methodology, 9th edition


Loss-of-Value

The degree to which an item has lost fair market value because of damage and subsequent professional repair/restoration. The loss-of-value of an item equals the difference in fair market value of the property prior to damage and the fair market value of the property after damage has been repaired.  

* Appraising Personal Property: Principles and Methodology, 9th edition


Book Value 

Book value is equal to the cost of carrying an asset on a company's balance sheet, and firms calculate it netting the asset against its accumulated depreciation. As a result, book value can also be thought of as the net asset value (NAV) of a company, calculated as its total assets minus intangible assets (patents, goodwill) and liabilities. For the initial outlay of an investment, book value may be net or gross of expenses such as trading costs, sales taxes, service charges, and so on.

 * Investopedia 

  

INTENDED USES AND THEIR POSSIBLE ASSOCIATED VALUE TYPE

  

Acquiring Insurance Coverage 

  • Replacement Value 


Insurance or Transit Damage/Loss Settlement 

  • Replacement Value 
  • Replacement Cost New Less Depreciation (ACV)
  • Fair Market Value 
  • Salvage Value 
  • Scrap Value 
  • Broad Evidence Rule (All Values Could Be Applicable)


Federal Tax Purposes 

  • Fair Market Value 


Estate Planning and Distribution of Assets Among Beneficiaries 

  • Fair Market Value 


Asset Based Lending (Collateral Loans)

  • Orderly Liquidation Value 
  • Forced Liquidation Value

 

Bankruptcy 

  • Fair Market Value 
  • Orderly Liquidation Value 
  • Forced Liquidation Value
  • Salvage Value 
  • Scrap Value

 

Client Sale (Liquidation) or Acquisition of a Property

  • Market Value 
  • Replacement Value 
  • Marketable Cash Value 
  • Orderly Liquidation Value 
  • Forced Liquidation Value 
  • Salvage Value 
  • Scrap Value 


Equitable Distribution 

  • Fair Market Value
  • Marketable Cash Value 
  • Net Value 
  • Value-in-Use 
  • Value-in-Place 


Liquidation and Dispute Resolution 

  • Fair Market Value Prior (Prior to Incident minus Fair Market Value after the Incident) 
  • Actual Cash Value 
  • Replacement Value 


Corporate Financial Reporting 

  • Fair Value 
  • Book Value

Approaches to Value

Sales Comparison Approach

Sales Comparison Approach

Sales Comparison Approach

A procedure to conclude an opinion of value for a property by comparing it with similar properties that have been sold or are for sale in the relevant marketplace by making adjustments to prices based on marketplace conditions and the properties’ characteristics of value.

Cost Approach

Sales Comparison Approach

Sales Comparison Approach

 A procedure to estimate the current costs to reproduce or create a property with another of comparable use and marketability. 

Income Approach

Sales Comparison Approach

Income Approach

 A procedure to conclude an opinion of present value by calculating the anticipated monetary benefits (such as a stream of income) for an income-producing property. 


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