When you purchase a new house, you would be well advised to obtain a registered market value valuation. In reality, your bank will often require you to do so.
Market Value is described in the Property Institute of New Zealand’s 2009 Practice Standard manual as:
“ …the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.”
In essence, market value supposes a hypothetical sale and incorporates a number of assumptions:
1 The parties to the hypothetical sale are both willing;
2 The hypothetical transaction must not be between related parties (eg a trust transfer);
3 The hypothetical sale must take place after exposure to the open market;
4 The parties must be sensible: they must be informed of all property details and be aware of prevailing market factors.
When assessing market value, valuers must therefore also be aware of the circumstances behind each of the sales used as evidence to form the basis of the valuation. Without these four assumptions, a sale cannot be considered to genuinely provide evidence of true market value.