Legal Definitions - price expectancy

Price Expectancy, also known as exhibition value, refers to the highest price a property would likely achieve if it were offered for sale on the open market for a reasonable period. This valuation assumes a transaction between a willing buyer and a willing seller, neither of whom is under any pressure or compulsion to complete the sale. It reflects the fair market value that a property would command after being properly exposed to potential buyers, allowing for sufficient time for interested parties to evaluate and make offers. This concept is particularly relevant in legal contexts such as eminent domain, where the government acquires private property for public use and must provide "just compensation" based on the property's fair market value.

Here are some examples illustrating price expectancy:

• Residential Property Acquisition for Public Use: Imagine a city decides to expand a public library and needs to acquire a private home located next door. The homeowner is not actively looking to sell but must comply with the eminent domain process. To determine the "just compensation" the city must pay, appraisers would assess the price expectancy of the house. They would consider recent sales of comparable homes in the neighborhood, the property's condition, its features (e.g., number of bedrooms, lot size, recent upgrades), and its desirability if it were openly marketed for sale. This valuation reflects the price a typical buyer would pay if the house had been listed on the market for a reasonable time, rather than a rushed or forced sale price.

• Commercial Building for Infrastructure Project: A state transportation department plans to widen a major highway and needs to acquire a small, independently owned retail building that sits directly in the path of the expansion. The price expectancy for this commercial property would be determined by evaluating what a willing buyer would pay for a similar retail space, considering factors like its specific location, foot traffic, building size, current rental income (if applicable), and potential for future development, assuming it was actively marketed for sale for an appropriate duration. This ensures the owner receives fair market value, not just the cost of construction or a discounted price due to the compulsory nature of the acquisition.

• Undeveloped Land for Utility Easement: A utility company needs to run a new underground pipeline across a large parcel of undeveloped land owned by a private individual, requiring an easement (a legal right to use a specific portion of the land for a particular purpose). Even though only an easement is being acquired, the compensation for that easement is often based on the impact on the land's overall price expectancy. Appraisers would consider the land's zoning, its potential uses (e.g., residential development, agriculture), comparable sales of similar undeveloped parcels, and how the easement might affect its future marketability or development potential if the entire parcel were offered for sale. The valuation aims to reflect the reduction in the land's fair market value due to the presence of the easement, as if the land had been openly marketed with that encumbrance.