Is the purchase price of a property always a reliable basis for determining its current market value?

The purchase price of a property is not always a reliable basis for determining its current market value because the value of real estate can fluctuate based on numerous factors. These include changes in market conditions, property improvements, neighborhood developments, or adjustments for land value and other factors that contribute to the overall assessment of a property's worth.

In many cases, the raw purchase price does not take into account the specific characteristics of the land or any additional structures on the property. For instance, if land value increases significantly over time or if improvements have been made to a property, the purchase price could be misleading when trying to ascertain the true market value today. Therefore, it's essential to consider adjustments for the land component and other structures, as they can significantly influence the current market value.

While some individuals may hold the view that the purchase price should be a fixed indicator of value, this perspective ignores the dynamic nature of real estate markets. Similarly, conceptualizing only the cost of the building limits the understanding of the overall property value since real estate is not just about the structures but also about the location, land, and prevailing economic conditions.