Part 9 - Market value
Concessions
a financial payment, special benefit, or non-realty item included in the sale contract or rental agreement as an incentive to the sale or lease. Can give sellers a competitive edge.
Effective Date
the date of the value opinion. Can be expressed in 3 ways: 1) retrospective (past) 2) current (the majority of appraisals) 3) prospective (future)
Seller-paid points aka discount points
- A percentage of the loan amount that a lender charges a borrower for making a loan; may represent a payment for services rendered in issuing a loan or additional interest to the lender payable in advance. - A common concession that appraisers adjust for when analyzing comparable sales. Are typically added to the sale price. - 1 discount point = 1 % of the mortgage amount. - Buyer-paid points are not a concession as they don't affect sale price
5 components of market value:
1) expressed as the most probable price 2) as of a specified date (the effective date) 3) in cash, or terms equivalent to cash or in other precisely revealed terms 4) should sell after reasonable exposure in a competitive market under conditions requisite to a fair sale, 5) with buyer and seller acting prudently, knowledgably and for self interest, and assuming that neither is under undue duress/stimulus
Exchange value
Economic concept, presumes the transfer of property rights.
Most probable price
How market value is always expressed. Market value means that if the first sale falls through and the property is placed on the market again, it could sell at or near the previous price. Is repeatable.
Marketing time
Is an opinion of the amount of time it might take to sell a real or personal property interest at the concluded market value level during the period immediately after the effective date of the appraisal.
Cash equivalency analysis
an analytical process in which the sale price of a transaction with nonmarket financing or financing with unusual conditions or incentives is converted into a price expressed in terms of cash or its equivalent. Focused on comparable sales.
Market value
is a stated opinion, the preferred phrase is Value Opinion (NOT value estimate). The dominant type of value sought in virtually every aspect of the real estate industry.
Incentives
sale concession
Arm's Length transaction
the parties are not related either through a business partnership or blood relationship.
exposure time
the time a property was available for sale in the market and always presumes to occur prior to the effective date of the appraisal. Also includes reasonable effort to sell the property.