Legal Definitions - actual value

Actual Value refers to the true economic worth of an asset, property, or service in an open and competitive market. It represents the price that a willing buyer would pay to a willing seller, neither of whom is under any pressure to complete the transaction, and both of whom have reasonable knowledge of all relevant facts. This value is objective, based on market conditions, and does not typically account for sentimental or subjective worth.

Here are some examples illustrating actual value:

• Property Tax Assessment: Imagine a local government assessing a commercial building for property tax purposes. The tax assessor determines the building's actual value by looking at recent sales of comparable commercial properties in the area, the building's size, age, condition, and potential rental income. This assessment aims to reflect what the property would realistically sell for on the open market, not what the owner originally paid for it or what they hope to sell it for in the future.

  This illustrates actual value because the assessment is based on objective market data and comparable sales, reflecting the property's current worth to a typical buyer and seller.

• Insurance Claim for a Damaged Item: Suppose a vintage guitar is stolen from a musician. When filing an insurance claim, the insurer will determine the guitar's actual value just before the theft. They won't pay for a brand new replacement or what the musician subjectively believes it's worth. Instead, they will research the market for similar vintage guitars, considering its make, model, year, condition, and any unique features, to determine what it would have sold for on the open market.

  This demonstrates actual value by focusing on the objective market price of the specific item at the time of loss, rather than its original purchase price or sentimental value.

• Sale of Used Business Equipment: A small bakery decides to upgrade its ovens and needs to sell its old, but still functional, commercial convection oven. To determine a fair asking price, the owner researches the actual value of similar used ovens. They look at online marketplaces, equipment dealers, and auction results for ovens of the same brand, model, age, and condition. The price they settle on reflects what a buyer in the market for used bakery equipment would reasonably pay.

  This example shows actual value as the market-driven price for a specific item, considering its condition and current demand among informed buyers and sellers, rather than its original cost or the seller's desired profit.