Appraisal Matters

So if the transaction amount is materially greater than the market value as shown by comparables or via another approach to value, is the seller and buyer just wrong about market value or do they know something that the market or the appraiser does not?  What exactly is the difference between the higher transactional value and the market value?

In my opinion, the difference is “investment value” or “value in use”.  Although the definitions of these terms (easily searched on the web) differs somewhat, what they share is they are a value to a particular person. The participants recognize the unique aspects about the real estate and it is built into the transactional amount. Unfortunately, conventional lenders will not lend on investment value or value in use, so a different financial vehicle is necessary.

John Simpson, MAI