9 - Market Value
Marketing Time
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 an appraisal.
Comparables
A shortened term for similar property sales, rentals, or operating expenses used for comparison in the valuation process. In best usage, the thing being compared should be specified, e.g., comparable sales, comparable properties, comparable rentals.
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. The concept of reasonable exposure includes not only sufficient and reasonable time but also reasonable effort to sell the property.
Arm's Length Transaction
A sale that takes place between unrelated parties
Components of Market Value
1. Most Probable Price 2. Specified Date 3. Cash or Cash Equivalency 4. Reasonable Exposure 5. Buyer & Seller Acting a. Prudently b. Knowledgeably c. For Self-Interest d. without Undue Stimulus
Examples of Concessions
1. Personal property (such as furniture, fixtures, and equipment). 2. Gift inducements and cash rebates (cruise tickets, a free month's rent, a landlord covering the moving costs of a new tenant). 3. Mortgage buydowns (i.e., when a seller pays discount points on the buyer's mortgage to lower the monthly payment. This is sometimes referred to as a mortgage interest buydown even though the buyer's mortgage interest rate is not changed. The "buydown" simply reduces the mortgage amount). 4. Seller paying closing costs that are normally paid by the buyer. 5. Non-market transactions on the side between buyer and seller (such as the seller paying an inflated price for a personal property item of the buyer and the proceeds are then used in the buyer's equity down payment). 6. Non-Market financing terms such as an existing mortgage at a favorable interest rate that is assumed by the purchaser or wraparound loans or loans with below market or blended interest rate provided to the purchaser.
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. Occur when the seller or lessor agrees to pay an inducement or to give some credit or property to a buyer or lessee, who in turn agrees to pay a higher price than the seller or lessor would normally receive for the property. Usually result in artificially inflated sale prices or lease rates.
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. One discount point equals one percent of the loan amount.
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.
Effective Date
Simply the date of the value opinion.
Estimate
Term still used in reference to cost, rents, capitalization rates, and other components of the valuation process.
Value Estimate (Estimate of Value)
Terms that have waned in their use in connection with market value.
Market Value
The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably and for self-interest, and assuming that neither is under undue duress.
Value Opinion
The preferred phrase in use today when referring to an appraiser's conclusion.
Examples Not Meeting Definition of Market Value
a. Liquidation, forced sale (sheriff's auction) b. Excessive or limited time on the