Definition Of Market Value

The “market value” is the most probable price that an income property should bring in a competitive and open market under all conditions necessary for a fair sale presuming the buyer and seller each act prudently, knowledgeably, and assuming the price is not affected by undue stimuli. Implicit in this definition the consummation of a sale as of a specified date and the title from seller to buyer under condition by:
1. Buyer and seller are typically motivated.
2. Both parties are well informed or well advised and each of them is acting in what one considers one’s own best interests.
3. A reasonable time is allowed for exposure in the open market
4. Payment is made in terms of cash of the same currency which the income property has adopted as their accounting standard or in terms of financial arrangements comparable thereto.
5. The price represents the normal consideration for the income property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

A fair market transaction must be a “win-win” for all parties concerned. The fair market value of an “active” income property, in its specific market, is that price at which:
1. The investors located within the market, will receive the current market rate of return for similar investments within the property’s market area.
2. The spendable income stream generated from the property will be adequate to pay the structured debt service that the sale of the property would create under the current market rates and terms offered at the current market down payment percentages.
3. The spendable income stream generated from the property will be adequate to pay all of the property’s expenses including a market wage, salary or fee to the property managers.