Abstract
Abstract Market value is one of the most difficult notions in economics. It is also one of the most puzzling in the valuation industry, although its definitions can be found in the International Valuation Standards, European Valuation Standards, RICS standards and national standards. This value tends to be given different interpretations and misconceptions surrounding it are shared by many members of the property valuer community. The many ways in which property market value is understood leads to misvaluations and significant variations between valuation results, which are damaging to the prestige of the property valuation profession. This article explores areas giving rise to the misinterpretations of property market value to provide a critical review of the existing views, and to put forward arguments explaining why they should be revised. To this end, a critical literature review and observations made by the author during discussions with valuation professionals taking skill-improvement courses, scientific conferences on valuation methodology and practice, and entry exams for the profession of property valuers are used. Three main areas conducive to the emergence of myths have been identified: the interpretation of property market value (four myths), the process of arriving at property market value (ten myths) and the interpretation of valuation results (one myth). The myths are challenged on the grounds of the market value concept and its interpretation as used in economics.
Highlights
Understood, the word "myth" means a misconception about someone or something, which is taken for granted without evidence
A myth is a story about a fact or event embellished with untrue yet colourful details (SŁOWNIK JĘZYKA POLSKIEGO 1979)
The property market value has been formally defined by the International Valuation Standards (IVS), the European Valuation Standards (EVS), the EU documents and in the Polish Real Property Management Act (RPMA)
Summary
Understood, the word "myth" means a misconception about someone or something, which is taken for granted without evidence. As humans tend to create myths for almost all aspects of their lives, it is hardly surprising that the concept and practice of valuation, and its fundamental element – market value – are not free of them either. It is quite natural given that market value, one of the most intricate in economic theory, is very complicated in valuation methodology and practice. Many authors of textbooks, lecturers and practitioners find it sufficient to cite the legal definition of market value, assuming that its concept is intuitively obvious. Using the definition of market value without trying to probe into its deeper meaning bears negative consequences for the practice of valuation and undermines the credibility of valuation results. It leads to many misinterpretations of value and paves the way for a wide array of myths
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