Market value shall mean the price at which land and buildings could be sold under private contract between a willing seller and an arm’s-length buyer on the date of valuation, it being assumed that the property is publicly exposed to the market, that market conditions permit orderly disposal and that a normal period having regard to the nature of the property, is available for the negotiation of the sale.
The price at which land and buildings could be sold under private contract is to be construed to refer to a monetary amount if the land and buildings were to be sold in the open market.
The use of the words private contract exclude sales by auction to the extent that this would realize a lower price than sales following proper marketing as between a willing seller and an arm’s-length buyer, and serves to emphasize that it is a realistic estimate at the date of valuation
“willing seller and an arm’s-length buyer” reinforces the dominance of economic reality, expressed through transactions in the open market, as the best price reasonably obtainable by buyer
The term “on the date of valuation” refers to the specific nature of the valuation, which assumes that the terms have been negotiated and the transaction completed at the date of valuation.
The connotation “it being assumed that the property is publicly exposed to the market” means that the asset would be exposed to the market in the most appropriate manner to effect its disposal at the best price reasonably obtainable in accordance with the market value definition.
The connotation “that market conditions permit orderly disposal, and that a normal period having regard to the nature of the property, is available for the negotiation of the sale” assumes that market participants are alerted to the opportunity through market exposure, but not that a hypothetical/unreal or false market has been created or is to be assumed, neither is a forced sale or one subject to compulsion simulated by the definition, but the sale is conducted in a manner appropriate to actual market conditions. A normal marketing period is one which will vary with market conditions for the type and class of property, land and buildings.
There is a fundamental difference between price and value. Market price designates what a property might be sold for at a specific period in time; value designates a property’s actual worth in relation to other similar properties For decision-making about land the relevant concept is in any case not the price but the opportunity cost. In economic theory the opportunity cost is defined as the cost of the most appropriate alternative use, i.e. the cost of a piece of land as compared to what could have been done with that same money if it had been used for something else.
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Urban Development Management Study notes for M. plan Sem-III
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