What does "liquidation value" mean in appraisal?

Liquidation value refers to the likely price a property would sell for under pressure to sell quickly, which typically occurs in scenarios where the owner needs to sell the asset rapidly, often due to financial distress or other urgent circumstances. This value is usually less than the fair market value because the urgency of the sale can lead to lower offers from buyers who may be aware of the seller’s need to sell quickly.

In contrast, the other choices represent different appraisal concepts. The estimated value of a property over the long term pertains to potential appreciation or market performance, which is not aligned with the urgent nature of liquidation. The average sale price of properties in a neighborhood provides a measure of market trends but does not account for the specific circumstances that impact liquidation scenarios. Lastly, costs associated with property maintenance relate to the ongoing expenses of owning a property, rather than its sale value under quick sale conditions. Understanding the nuances of liquidation value is crucial for appraisers, especially in distressed property situations.