Illinois Real Estate Practice Exam

What is market value?

1. The highest price a buyer is willing to pay

2. The price paid by the last buyer of the property

3. The amount at which a willing and informed seller would sell and a willing and informed buyer would buy a property

4. The price determined by the appraiser

The correct answer is: The amount at which a willing and informed seller would sell and a willing and informed buyer would buy a property

Market value is defined as the amount at which a willing and informed seller would sell a property and a willing and informed buyer would buy it. This definition emphasizes the voluntary nature of the transaction, reflecting a fair assessment of value without coercion or pressure influencing either party. In real estate, market value is often considered the ideal price that would be agreed upon in an open market under normal conditions. It factors in all relevant aspects such as the current market conditions, comparable property sales, the specific characteristics of the property, and buyer and seller motivations. The other options, while they may represent different price points or perspectives, do not capture this balanced definition of market value. For instance, the highest price a buyer is willing to pay may not represent the true market value, as it could be influenced by overbidding or emotional factors. Similarly, the price paid by the last buyer might not reflect current market conditions, and the amount determined by an appraiser is just one perspective that might be based on various methodologies but does not necessarily consider the dynamic nature of buyer and seller interactions.