Prospective Value
A forecast of a property's value at a future date, based on anticipated changes in market conditions, property improvements, or other factors. Used for proposed construction, renovations, or lease-up scenarios.
Prospective value opinions are commonly needed for construction loans (as-completed value), development projects (as-stabilized value), and renovation financing. The appraiser estimates what the property will be worth upon completion of construction or after reaching stabilized occupancy. Prospective values involve hypothetical conditions (the improvements don't yet exist) and must be clearly labeled as prospective. The analysis must be reasonable and based on current market data projected forward. Both the as-is and prospective values are often reported in the same appraisal for construction and renovation loans.
Related Terms
As-Is Value
The value of a property in its current physical condition, as of the effective date of the appraisal, without any hypothetical conditions or extraordinary assumptions about future improvements or changes..
Hypothetical Condition
A condition that is contrary to known fact but is assumed for the purpose of analysis.
Market Value
The most probable price that a property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus..
Scope of Work
The type and extent of research and analysis performed in an appraisal assignment.
More in Appraisal Process
View allEffective Date (Date of Value)
The date on which the appraiser's opinion of value applies.
Extraordinary Assumption
An assumption that is directly related to a specific assignment and, if found to be false, could alter the appraiser's opinions or conclusions.
Intended Use
The use or uses of an appraiser's reported appraisal or appraisal review as identified by the appraiser based on communication with the client at the time of the assignment.
Engagement Letter
A written agreement between the appraiser and client that outlines the terms of the appraisal assignment, including the property, intended use, scope of work, fee, timeline, and any special conditions..