An approach in
appraisal analysis based on the
propositional that an informed buyer will
pay no more then for a property then the
cost of acquiring an exiting property with
the same utility.
Steps
Required
Locate and select
all available comparable sales and
listings (mostly from MLS); within the
local market place, at or near the date
of appraisal, select same type of
property (single family, semi-detached,
duplex, triplex, etc...)
Collect pertinent
information on each property to make
meaningful investment decisions
Analyze all the
relevant date, including differences
that exist between each property
Compare all
properties with the subject property,
making all the necessary adjustments,
adjustments can be either a dollar or a
percentage amount
Reconcile all the
compiled data to arrive at reasonable
estimate value
Significant
Characteristics
Adjustments should be
made based on significant and pertinent
characteristics only. For example, the
market may indelicate that the difference
paid for a property with 2-car garage
compared to 1-care is only $25,000, however
one must take into account the cost of
adding an extra garage space.
A demand for real
estate not currently serviced in the
marketplace, most commonly associated with
commercial properties, but in fact apply to
all types of real estate.
In real estate,
investors rely on various market indicators
for important investment decisions making.
Measures of the market typically include
sale to price ratio, number of days on the
market, average and median price and sales
volume (both in number and dollar values).
Based on the concept
that market niches exist within the overall
marketplace. These niches present an
opportunity to provide a specific service,
offer a unique product or generally promote
a distinct image to the public.
The amount paid, or
to be paid for a property in a particular
transaction. Market price is a historic and
established fact, as opposed to market value
that remains an estimate until proven
otherwise.
Under an efficient
marketplace, where property is openly
offered and promoted to well-informed,
capable buyers, market price and market
value closely approximate each other.
The rental income
that a property would most probably command
on the open market, as indicated by the
current rentals being paid for comparable
space as of the effective date of the
analysis.
The term market rent
is synonymous with economic rent.
The highest price in
terms of money, that a property will bring
to a willing seller if exposed for sale on
the open market; allowing a reasonable time
to find willing buyer; and with neither
buyer nor seller acting under necessity,
compulsion nor peculiar and special
circumstances.
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