Presumed maximum value (PMV) is a legal concept which may also be referred to as a “presumptive” maximum amount. It is defined as a maximum valuation or ceiling price set by a court for a transaction involving real estate or other property. In establishing a PMV, the court considers both the value of the property and the surrounding economic conditions which may affect the amount of money a buyer would be willing to pay based on those conditions.
Examples of Presumed Maximum Value (PMV)
A common use of PMV would be in the setting of foreclosure sale prices. When a court is required to determine a sale price for a property, the presiding judge can set a PMV. This amount represents the most a buyer could be willing to pay for the property given its current condition, features, and the surrounding economic climate. This PMV could be significantly lower than the actual market value in order to encourage buyers to purchase the property at a reasonable price.
Benefits of Presumed Maximum Value (PMV)
Establishing a PMV can provide a degree of certainty and consistency for the parties involved in the transaction. The court sets the PMV in order to bring fairness to the process, assuring that the parties are buying and selling property at a fair market value.
The PMV also protects the buyer and seller from potential losses associated with fluctuating markets. The PMV establishes a ceiling price which limits the amount a buyer may pay and prevents the seller from taking advantage of buyers in a rapidly rising market.