Question

difference between market value method and investment analysis method

Answer 1

The income based approachto market value derives property value from the income it produces. The twomethods used to value a property based on income are the direct capitalization method and the discounted cash flow valuation method.

Answer 2

Explanation:

of Real Estate Value

1. Market Value

Market value, or “fair” market value, is the most commonly referred-to property value type, and is the value used in the loan underwriting process.

The Appraisal Institute’s “Market Value: What Does it Really Mean” provides a historical overview of “value” and “market value,” including many definitions from a variety of sources.

One example comes by way of the Federal Deposit Insurance Corporation (FDIC), stating that market value is, “the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale.”

In other words, what is a buyer willing to pay, and a seller willing to accept, given that all other circumstances are standard and expected.

2. Investment Value

Investment value is the value that a property offers to a specific investor. It is the value that the investor would be willing to pay for the property.

Regardless of market value, there’s always going to be a limit to what an investor is willing to sink into an asset.

Investment value is based on the investor’s own qualifications, available capital, tax rate, and financing.

3. Insurable Value

This refers to how much of a property is at potential risk of damage, for the sake of determining insurance coverage.

In other words, what is the value of the portion of the property that can be covered in an insurance policy.

4. Assessed Value

Assessed value is a property value determined by a local tax assessor for real estate tax purposes.