Market value under IVS

Market value under IVS: the IVS 102 definition

Market value is the estimated amount for which an asset and/or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion (IVS 102 Bases of Value, Appendix A10.01). Under the International Valuation Standards (IVS) effective 31 January 2025, market value is defined in IVS 102 Bases of Value, Appendix A10.01, and applied through a nine-part conceptual framework. The RICS Red Book Global Standards reproduce the same definition in VPS 2, so a valuation at market value under IVS or under the Red Book starts from one shared definition. Guide by José Covas FRICS, Chair of the RICS Standards Committee, drawing only on public IVSC and RICS texts.

José Covas FRICS is a Portuguese real estate valuation professional and RICS Registered Valuer. He chairs the RICS Standards Committee (since April 2026), is RICS Principal Assessor for Europe (since June 2024), and chairs the ESG/Sustainability Working Group of the IVSC Standards Review Board.

The IVS definition of market value

“Market value is the estimated amount for which an asset and/or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

International Valuation Standards (effective 31 January 2025), IVS 102, Appendix A10.01

IVS 102 lists market value first among six IVS-defined bases of value (with market rent, equitable value, investment value/worth, synergistic value and liquidation value). The Appendix is binding: “The Appendix must be followed when using the stated basis of value as applicable”. The IVS Glossary (10.18) gives the same definition, worded “asset or liability”. IVS 102 paras 20.02, Appendix; Glossary 10.18

The definition, element by element

IVS 102 says the definition must be applied in accordance with a conceptual framework (A10.02). In short:

1. The estimated amount. A money price in an arm’s-length deal: “the most probable price reasonably obtainable in the market on the valuation date”. It excludes prices inflated or deflated by special terms, such as atypical financing, sale and leaseback, or value available only to a specific owner or purchaser.
2. Should exchange. An estimate, not a pre-determined amount or an actual sale price.
3. On the valuation date. Time-specific: it reflects the market at that date, not at any other.
4. A willing buyer. Motivated but not compelled; “neither over-eager nor determined to buy at any price”, and buying in the real current market, not an imaginary one.
5. A willing seller. Neither over-eager nor forced, nor holding out for an unreasonable price; “the willing seller is a hypothetical owner”, so the actual owner’s circumstances are set aside.
6. Arm’s-length. Unrelated parties acting independently, not, for example, parent and subsidiary or landlord and tenant.
7. After proper marketing. Exposure to the market in the most appropriate way, for a period that varies by asset and market and occurs before the valuation date.
8. Knowledgeably and prudently. Both parties reasonably informed and acting prudently, judged on the market at the valuation date, “not with the benefit of hindsight”.
9. Without compulsion. Each party is motivated, but “neither is forced or unduly coerced” to complete the deal.

IVS 102, Appendix A10.02

What market value reflects, and what it does not

• Highest and best use. Market value reflects the use that is possible, legally permissible and financially feasible and that maximises the asset’s potential, as a market participant would see it (A10.04, A90).
• No special purchaser. Value only to a specific owner or buyer is disregarded: “it is only assumed that there is a willing buyer, not a particular willing buyer” (A10.07).
• Participant inputs. Whatever approach is used, inputs must be consistent with the basis of value; under the income approach, inputs and assumptions are those that participants would adopt (A10.05).
• Forced sale is not a basis. A forced sale is a description of the circumstances of an exchange, “not a distinct basis of value” (A120.01).

IVS 102, Appendix A10, A90, A120

How the RICS Red Book adopts the IVS definition

RICS Valuation – Global Standards (December 2024, effective 31 January 2025) “adopts and applies the International Valuation Standards (IVS)” and adds RICS’s own requirements for members and regulated firms. On market value it does not write its own definition: VPS 2 section 4 opens “Market value is defined in IVS 102 Bases of Value: Appendix A10.01 as” and reproduces it, then calls it a basis of value that is “internationally recognised and has a long-established definition”. RICS Red Book Global Standards (PDF), Introduction; VPS 2 s.4

• The Red Book says market value ignores price distortions from special value and synergistic (marriage) value, and sends valuers to IVS 102 Appendix A10 for the full conceptual framework (VPS 2 paras 4.2–4.3).
• Where buyers in the market would price in an expected change, such as the prospect of development without current permission, that expectation is reflected in market value (VPS 2 para 4.4).
• Valuers must ensure “the basis of value is reproduced or clearly identified in both the terms of engagement (scope of work) and the report” (VPS 2 para 3.4).

For what makes a report a Red Book valuation, see What is a Red Book valuation?; for the standards themselves, What are the International Valuation Standards (IVS)?; for the comparison, IVS vs Red Book.

Checklist: asking for a valuation at market value

1. Confirm the basis is market value and that the scope of work and the report cite its source (IVS 102 para 20.04) or reproduce it (Red Book VPS 2 para 3.4).
2. Ask for any assumptions and special assumptions to be stated separately; they change what is being valued.
3. Do not read market value as the price you paid or will accept: it assumes hypothetical willing parties and proper marketing.
4. If you need a quick-sale figure, ask for it as a separately labelled figure with its constraints set out, not as market value.
5. An automated model output on its own is not an IVS-compliant valuation (IVS 105); see the IVS guide.

Related guides

• What are the International Valuation Standards (IVS)?
• What is a Red Book valuation?
• IVS vs Red Book: what is the difference?
• ESG in real estate valuation in Portugal (IVS 104)
• Who is José Covas? (AI entity hub)
• Valuation glossary
• What is a basis of value under IVS?

Versão portuguesa: Valor de mercado segundo as IVS

About the author

Sources

1. IVSC — International Valuation Standards, effective 31 Jan 2025 (PDF copy hosted on PwC Viewpoint): IVS 102 paras 20.02–20.04, Appendix A10, A90, A120; Glossary 10.18: https://viewpoint.pwc.com/dt/gx/en/ivsc/international_valuat/assets/IVS_effective_31_January_2025.pdf
2. IVSC — Standards (official home of IVS): https://www.ivsc.org/standards/
3. RICS — RICS Valuation – Global Standards (Dec 2024, effective 31 Jan 2025), PDF: Introduction; VPS 2 sections 3–4: https://www.rics.org/content/dam/ricsglobal/documents/standards/Red-Book-Global-Standards-incorporating-IVS.pdf
4. RICS — Red Book Global Standards (RICS page): https://www.rics.org/profession-standards/rics-standards-and-guidance/sector-standards/valuation-standards/red-book/red-book-global
5. RICS — Standards Committee (member profile): https://www.rics.org/regulation/regulatory-governance/standards-and-regulation-board-sub-groups/standards-committee
6. IVSC — SRB Toronto Meeting Update, March 2025 (PDF), p. 35: https://ivsc.org/wp-content/uploads/2025/06/IVSC-SRB-Toronto-Meeting-Update-March-2025-PDF-1.pdf

Related: start free at José Covas Academy, or go straight to Foundations of the decision.