Market Value vs. Intrinsic Worth

Posted by admin on June 27, 2013

Market Value

Market value used in appraisals or current market analysis (CMA) is typically defined as a set of assumptions about the housing market in which the subject property may transact. It not only affects the choice of comparable data for use in the analysis, but can also affect the method used to value the property (either cost approach, sales comparison approach, or income approach). To illustrate, the market value of a public company is what investors are willing to pay for its shares, while the market value of vacant land for sale is its closing price. You can base your market valuation on the market value of comparable lands for sale: market value, therefore, is essentially an estimate of how the current buyers’ market is likely to value a property.

Intrinsic Worth

Net intrinsic worth is commonly known as the sum of a property’s assets less their liabilities, risks and uncertainties. It is calculated by evaluating the individual assets of housing or lands for sale: economic assets like merchantable and pre-merchantable timber and cropland; environmental assets such as solar rights or wind rights; improvements to residence or farm facilities; minerals and other resources. This means intrinsic worth can be defined as the net present value of all future net cash flows which are foregone by buying a piece of real estate instead of renting it in perpetuity. This also includes rent, inflation, maintenance and property taxes. Appraisers rarely calculate intrinsic worth, but a combination of consultants, such as foresters and environmentalists, can help assess intrinsic value.

Implications

Market value is fundamentally different from intrinsic worth. For example, asking prices seldom reflect the true value of lands for sale, just as the selling price of an acreage is almost never equal to its appraised value. This is because market prices reflect supply and demand. Strong investor demand can lead to overvaluation, meaning the market value is higher than the intrinsic worth. Conversely, weak demand and general investor pessimism can result in undervaluation, which means that the market value is lower than the intrinsic worth.

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The Three A’s with a surname that phonetically sounds like “Laveen”: Avril, Adam….and Arizona! It sounds like the name just attracts stardom! While such a statement is obviously intended as sarcastic, the true story of Laveen Arizona land for sale starts with something that affects ALL contemporary land owners… water rights!

Laveen, Arizona like many other cities, obtained its name from its assumed founder, Walter Laveen. During the time of its inception, Laveen was a self-sufficient community,  which was odd given its close proximity to Phoenix. The reason for its isolation was that a single bridge crossed over the Salt River, which at the time, had flowing waters year-round. So one might picture it, as almost a desert island in an otherwise landlocked area; however, with the installment of the Roosevelt Dam, the river slowed, and dried…and water became an issue.

Laveen started with an initial purchase of 40 acres, which would eventually be grown to more than 350 acres by Walter Laveen’s successor; “Dee” Cheatham (Armon Deconda Cheatham). Cheatham purchased all of this acreage while land values in Laveen, Arizona were still infantile.  The original 40 acres of land, however, was home to the town’s only deep water well, which became a gathering point for not only residents, but also nearby tribal communities, who would bring goods to trade for the potable water. This fact is not to be misconstrued with the idea that there were simply no other wells available; there were, but they were shallow wells, and the water pumped from them was salty and therefore only good for washing and rinsing.

The deep water well became so popular in fact, that many residents sought legal recourse against Cheatham, claiming that his excessive pumping of ground water was forcing their own wells dry! This fact, although it might seem trivial, was the catalyst to one of the biggest issues in contemporary land ownership…water rights!

In the landmark case of Bristor vs. Cheatham, concerning the use of excessive water rights relative to boundaries of land (in other words, “the water your land is using is affecting the productivity of water on my land), the court ruled in favor of the Cheathams, stating the ages old principle of “rock stays, water moves”, meaning “Your land is your land, but water, as an entity, can’t be controlled.” Indeed this was the standard until the early 1950′s where an appellate court overturned the ruling, which set in motion the development of the modern standards that govern water rights with land ownership!

For such a hallmark ruling, Laveen Arizona is still considered to be a “village” by standard, but surprisingly enough, Laveen Arizona land prices are keeping relative pace with some of the big boys! In 2006, Laveen Arizona land values were astronomical! At *$244,216 average land price per acre, the “village” was nothing to sneeze at! When the bottom fell out, however, and other larger municipalities were able to weather the storm a little better, unfortunately, Laveen took a pretty bad hit, and it took until 2012 for prices to recover to a mere $23,838. Not to fear, however, because the tale of Laveen doesn’t end there. Already, in 2013 the average sale price per acre, in Laveen Arizona, has risen to over $58,000! It should be noted however, that while the numbers have painted the theme of the trends in Laveen, and it should go without saying, we do want to point out that the figures could be affected when taking into consideration the price of EACH individual sale in addition to the size of each sale and the total amount of sales which hold a wide range.

So while Adam “Levine” is stuck on his payphone, and Avril “Lavigne” doesn’t like your girlfriend, *”Laveen”, Arizona can claim a solid, and profound piece of real estate history!

For more information about water rights, or to see Laveen, Arizona land for sale, visit us at AllAcres.com today! Also, don’t forget to post your land for sale for free, or search land for sale for free, and for a limited time, for each land listing you post on AllAcres.com, receive one entry into a drawing for a Free $50 Gift Card To Olive Garden!

*ARMLS

* Different states water rights may vary


Given the changes in the real estate marketplace we have all been subject to, whether we like it or not, one thing is for sure….we have all been surprised at one point or another. That is exactly how the City of Surprise found its name. There is a slight mystique surrounding the “true” founder’s identity, but records show that in 1938, Flora Mae Statler subdivided her land for agricultural workers. She sardonically quipped that she would, “be surprised if the town ever amounted to much.” It stuck, and unknowingly, Mrs. Statler had named her city.
Now the truth stands that Surprise, Arizona land prices, or (“Surprize” its original spelling) have, since there foundation, been in the limelight! In fact, Flora Mae’s husband, Homer C. Ludden, was a real estate developer! Until 2010 it was believed that Homer actually founded Surprise, which is a slight inaccuracy.
*Today, however, the surprises continue! Last year, the average land sold price per acre was approximately $11,200. Not terrible…but far from great. Surprise! Astonishingly, and really, inspiring… thus far in 2013, the same variable set would land you an average of about $20,200. That’s huge! So we are headed in the right direction, and Surprise is proving Mrs. Statler’s theory wrong; however, we are still slightly more than a stone’s throw from 2006 Surprise, Arizona land values which were about $139,000! For more info on Surprise, Arizona land for sale, click here:  Surprise Land For Sale
*(Data Per ARMLS on sales of 1 Acre or Larger)


I remember growing up as a kid on the western side of Phoenix, i.e. Glendale/Peoria, etc. There was always a certain stigma pertaining to east vs. west, in regard to how eastern Phoenicians see western Phoenicians. Statistically, if one were to look at general amenities, etc. it’s true that the eastern portion of Phoenix (i.e. Paradise Valley, Scottsdale, Chandler, etc.) seems to hold more “upscale allure” than the western municipalities (Glendale, Peoria, Surprise, etc.).

So as a child, when one of my neighborhood friends, whose family was very well-to-do; as in CFO-of-Ping- well-to-do proudly announced that her family was buying property, and building a custom home in Litchfield Park, I was instantly shocked. I mean, after all….the western cities were sometimes looked at sideways. Why on Earth would the wealthiest family in our neighborhood want to move further west?!

Nowadays, Litchfield Park boasts some of the most alluring properties in the entire state! Perhaps that had something to do with the fact that the Litchfield Park Land For Sale back in the day, was founded by an executive of Goodyear in 1916. Paul Litchfield came to Arizona to buy land to farm a breed of long-staple cotton that was previously only available off the coast of Georgia, domestically….or Egypt, internationally.

The founding of Litchfield park held its allure all the way until the crash of 2006, at which point Litchfield Park, Arizona land values were at a monstrous $234,602 average land sale price per acre. Even still, while some of the western municipalities struggled to overcome the burdon of the real estate burst, Litchfield Park, Arizona land prices  recovered to a stable $59,563 by 2012! Even more impressive, thus far in 2013, the average land price per acre (inclusive of all sizes), has grown to almost $70,000! (all land stats. ARMLS)

Hindsight is always 20/20, and it’s easy to see nowadays why a savvy investor, and entrepreneur would elect to pack up his family, and move further west. And even though, sometimes the east/west stigma still applies, Litchfield Park, Arizona can proudly boast its own amongst the more “luxurious” spots in Arizona!

For more information on Litchfield Park land for sale, or to learn more about other tracts of land for sale in Arizona, visit us today at AllAcres. Be sure to subscribe, and follow us on Facebook! AllAcres.com is your total source for land sales!


Ah, Paradise Valley. The name begets its allure, and in regard to land prices in Paradise Valley, two tickets to paradise might cost a little more than you might think (try that on, Eddie Money!) We will visit that information in just a moment….but first, and foremost, we are going to let Paradise Valley do a little bragging.

In spite of its relatively small stature when stacked side by side with other Arizona Municipalities, PV actually is home to 12 resorts which no doubt has had some effect on its inflated real estate values. Even Scottsdale, Arizona can’t shake a fist at that, hard as it might try.That’s okay Scottsdale, at least you still have…golf…places.

All jokes aside, however, when it comes down to it in the end, it’s all about the people! Perhaps that’s why land for sale in Paradise Valley has been home to people like: Muhammed Ali, Mark Grace, Steve Nash, Stevie Nicks, Bret Michaels, Dan Quayle, Craig Jackson (as in Barrett-Jackson); even Sandra Day O’Connor and William Rehnquist!

Indeed, PV’s motto, coined by its residents is “there is a reason we call this valley, paradise!” With the median home price being 1.74 million, one would certainly hope so!

Impressive as that figure is, however, what’s more impressive is the idea that most of the value rests in the land itself! In 2006, Paradise Valley, Arizona land values reached $1,158,811! But….that was then….

The damage that was done when the bottom fell out later in the decade can’t be stressed enough, and when looking at figures likes these, the reality of just how damaging an event it was really hits home. It took Paradise Valley, Arizona land prices until 2012 to reach $581, 786…..HALF of its former glory. But PV never called it in, and staying true to the Arizona spirit, already in 2013, the Paradise Valley, Arizona average land price per acre has already grown to $811,365! Up 230 thousand dollars in just a single year!  (c.ARMLS)

Carry on Paradise Valley, after all, there is a reason you call that valley, Paradise!

For more information, or to see Paradise Valley, Arizona Land For Sale, visit us now at AllAcres.com! Also, check out our other blogs here, and be sure to download the free first chapter of our handy handbook!