Market value and the principles of value

Market value is an opinion, not a receipt

Market value is the most probable price in a competitive, open market under normal conditions: informed and prudent parties, no undue pressure, reasonable exposure, and cash or cash-equivalent terms, as of a stated date. Price is the amount paid. Cost is the expenditure to create or acquire something. Investment value reflects a particular investor's requirements; value in use reflects usefulness for a particular use. These can differ from market value.

What supports value?

Value depends on demand backed by purchasing power, utility, scarcity, and transferability. Desire without purchasing power is not effective demand. Scarcity without usefulness or interested buyers is insufficient.

Market value, as of a stated date, is at the center. One connected box lists effective demand, utility, scarcity, and transferability, which support value. Another lists substitution, anticipation, contribution, and supply and demand, which explain market behavior. — Value elements support value; market principles explain buyer behavior.

Principles explaining the market

Substitution: an equally desirable available alternative, without undue delay, limits what a buyer will pay.
Anticipation: expected future benefits, including rent and enjoyment, influence present value.
Supply and demand: changes in available properties and purchasing demand affect prices.
Change: economic, physical, governmental, and social conditions make value date-specific.
Contribution: measure an improvement by its added value to the whole. A $40,000 kitchen adding $25,000 in market value contributes $25,000.
Increasing and decreasing returns: successive investment can initially add more value than cost, then add less.
Balance: productive proportions of land, labor, capital, and management support value.
Conformity: compatibility with surrounding properties supports value. Progression can lift a modest home among superior homes; regression can depress a superior home among inferior homes.
Competition: profit opportunities attract suppliers and can reduce excess profits.

Highest and best use is legally permissible, physically possible, financially feasible, and maximally productive. The most costly proposal need not qualify. Assemblage combines parcels; plottage is the excess of combined value over their separate values.

Florida tax values

Florida separately records just value, assessed values, and taxable values on the real property assessment roll. Homestead assessment limits can leave assessed value below just value. Tax figures serve statutory purposes and do not replace a market value analysis.

These principles describe market tendencies, not promises of a fixed gain from an improvement or neighborhood change.