Venal value

The market value of a product is the estimate for the price of a good at a given moment and taking into account its valuation in the second-hand market.

In practice, it is generally understood that the market value is identified with the attainable market value for a good sold in the second-hand market.

In other words, it is an estimated figure taking into account a series of factors and characteristics that define the product and its state at a given time.

This concept is commonly applicable in many sectors, such as real estate, highlighting the automotive sector or the sale of industrial machinery.

In these areas, the exchange of second-hand goods is constant, so the market value is present in these transactions.

Determining factors in the calculation of the venal value

Venal value depends on certain observable characteristics of the asset to be valued:

  • Antiquity or life of good.
  • Serial characteristics of the good (inventory of parts, dimensions, estimated useful life).
  • Deterioration with respect to the original situation, that is, when it was new. In other words, its state of conservation or maintenance.
  • Extra modifications or improvements that may increase its value. It would result in what is known as improved venal value.
  • Potential demand in the market for that same good at the time of its study.

Venal value example

Venal value is a recurring concept in the insurance sector, as it is constantly used in appraisals of assets such as real estate or automobiles.

In cases of deterioration or claims , insurance companies usually take into account the market price of a particular model. When it comes to recovering costs for a vehicle, for example, said amount can be calculated following the market value for the same model.

It is usually understood that, in these cases, the market value of the damaged car would correspond to the market value calculated for said model (with its characteristics and age).

Venal value with respect to origin value

On the other hand, in most cases the market value is lower than the initial purchase value when the product is new. This is produced by the existence of the use and deterioration, as well as amortizations , of the property.

However, there are cases in which according to the nature of the venal good price rises above the price again or origin.

That is to say, a revaluation is seen as a consequence of the elapsed time or trends in the market. Examples of this are products such as certain types of wine, works of art, stamp collecting or antiquarian goods.

 

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