What does Rule 2 state regarding price and value?

Rule 2 establishes that price equals value under certain circumstances, helping to clarify the relationship between the two concepts. In appraisal practice, "price" refers to the amount paid for a property in a transaction, while "value" denotes the worth of that property as perceived by the market, which can be influenced by various factors.

This rule recognizes that there are instances, such as in a well-functioning market with ample data on comparable sales and active interest from buyers and sellers, where the price achieved in a sale truly reflects the property's market value. This is often seen in residential real estate transactions during stable periods when supply and demand align effectively.

Moreover, this principle underlines the importance of context in the appraisal process. It indicates that while price and value can coincide, it is not a universal rule. Market dynamics and specific conditions can lead to variations where price is not always a direct indicator of value, hence the necessity for appraisers to consider multiple factors in determining an accurate valuation.