What term describes the most probable price in an arm's-length transaction in a competitive and open market?

• A. Market value
• B. Appraised value
• C. Invested value
• D. Assessed value

Answer: (B)

Market value is the price most buyers are willing to pay and sellers are willing to accept in a competitive, open market under normal conditions, with both parties acting without undue pressure. It reflects the actual cash price that would likely result from an arm’s-length transaction where there’s reasonable exposure to the market and knowledge of relevant facts.

An appraised value is the estimated worth determined by a licensed appraiser using standard techniques (comps, cost, income approaches) for a specific purpose, such as financing or taxation. This value can be close to market value but is not guaranteed to be the price a property would fetch in an actual sale, since appraisal assumptions, timing, and scope can influence the figure.

Assessed value is the value used for property tax purposes, often lagging behind current market conditions. Invested value is not a standard market value term; it relates more to an investor’s calculation of value based on costs and desired return.

So, the term that best describes the most probable price in an arm’s-length transaction in a competitive and open market is market value.