Marketable and Non Marketable Property

Marketable and Non Marketable Property

All the properties falling under the group of investment property at marketable as there is always a demand for them at some price because, it is a property which has an earning capacity. Exceptions if there some lease-hold properties and distributor’s franchise. But the contractual or legal restrictions are removed, they can be sold. For this reason, it is not necessary to classify these properties under another category like “non-marketable investment property” in the schem of classification for the purpose of valuation.

A close scrutiny of the properties in the second group would show that some of them are marketable in the sense that they are of a type commonly bought and sold, but the others are not so. On this basis, the non-investment properties can again be divided into two groups “Marketable” and “Non-marketable” as under :

Marketable non-investment Properties Non-marketable non-investment Properties
  • Single-family owner-occupied  residential house constructed on freehold land
  • Religious property
  • Single-family owner-occupied redential house constructed on lease-hold land
  • Public school
  • Private vehicle
  • City hall
  • Personal clothing
  • Jail
  • Machinery and equipment
  • Non-commercial hospital
  • Furniture
  • Machine (specially designed and build to order)
  • Office equipment
  • Gems and jewelry
  • Furs
  • Stamp collection

The three major classes of the property which thus arise are :
• Investment
• Marketable non-investment
• Non-marketable non-investment
A non-marketable non-investment property is also termed as a service property.

In order to decide the method of valuation to be adopted, the tests which are applied are As follows :
If the property concerned falls under the category which has no earning expectancy but can be bought and sold, then it is classified as “marketable non-investment property”; if it is not marketable, it is classified as “service property”.

Features of monetary value of the property
• It is a capital amount
• It exists at each point in time during the life of the property
• It is subjective and not objective
• It is dated And. In the case of a chattel and process plant, the amount of monetary value depends on the place where these are located.

Differential value characteristics of the three classes of property
• In the case of “a marketable investment property “, the value is generated and therefore may be derived from the earning capacity.
• In the case of “a marketable non-investment property”, the value is generated by the expectation of amenities and the satisfaction of a non-pecuniary character which can be acquired on purchase.
• In the case of a tangible service property, the satisfaction of the owner’s non-pecuniary needs or desires is accomplished not by direct purchase of a completed whole property but by assembly and/or construction of physical components. It is the possession, us and/or consumption of the service property which generates its value. The following table gives the characteristics of property falling under each category :

Property classification Value characteristics
Investment property -Monetary yield to the owner (similar to interest earned)
-Marketability
-Recovery of invested capital
Marketable non-Investment property -Usefulness to the owner without direct monetary yield
-Marketability
-Non-recovery of original cost in general
Servis property -Usefulness to the owner without direct monetary yield
-Non-marketability
-Non-recovery of original cost in general
Property classification Primary element of value
Investment property -Investment value
Maeketable non-investment property -Market value
Service property -Owner value

• Only in the case of investment property, there is the expectation of recovery of the invested capital. This recovery comes from monetary returns.
• Ingredients of investment property :
*Utility
*Marketability
*Self-liquidity

• A marketable non-investment property has only two value ingedients
*Utility and marketability
• Service property has only one value ingredient- utility which produces the value to the owner.

• The following table gives a total picture :

Property Classification Value Ingredients Elements of value
Investment property Utility Owner value
Marketability Market value
Self-liquidity Investment value *
Marketable non-investment property Utility Owner value
Marketability Market value *
Service property Utility Owner value *

• Primary element of value

[ Marketable and Non Marketable Property ]
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