Chapter 1
Arkansas Real Estate Law and Commission
Course: Arkansas Real Estate Exam Prep
Subject: Arkansas State Broker Exam Prep
Chapter: Valuation And Market Analysis Of Arkansas Real Estate Broker Exam Prep
Principles of Value
Value represents the present worth of future benefits derived from property ownership. People purchase real estate because they expect ownership to provide benefits. These benefits may include shelter, income, appreciation, security, business opportunities, investment returns, prestige, or personal enjoyment.
Because value reflects anticipated benefits, it is influenced by both objective property characteristics and subjective buyer perceptions.
A property's value is not necessarily equal to its cost, price, assessed value, insurance value, or replacement cost. These concepts are related but distinct.
Cost Versus Price Versus Value
Confusion frequently arises because cost, price, and value are often used interchangeably in everyday conversation. In real estate analysis, however, each term has a distinct meaning.