Valuation and Market Analysis
Market value is the most probable price in a competitive, open market with informed, willing parties, no undue stimulus, and reasonable exposure time. Price is what a property actually sold for; cost is what it took to build; value is an estimate. Highest and best use - legally permissible, physically possible, financially feasible, maximally productive - frames every approach.
Three approaches
Sales comparison: adjust comparables to the subject. Always adjust the comparable, never the subject: if the comparable is superior, subtract; if inferior, add. Cost approach: land value plus replacement cost new minus depreciation (physical deterioration, functional obsolescence, external obsolescence); strongest for new or special-purpose property. Income approach: value = NOI ÷ cap rate, and GRM = price ÷ monthly rent.
Market analysis
Agents produce CMAs and market analyses; only appraisers produce appraisals. Absorption rate, days on market, list-to-sale ratio, months of inventory, and employment or population trends describe conditions. A buyer's market shows high inventory and downward price pressure; a seller's market shows the reverse.
Traps
Adjustments applied to the subject, cap rate used upside down, and depreciation confused with income-tax depreciation. External obsolescence is incurable and originates outside the site.
Worked example
NOI is $48,000 and the market cap rate is 8%: value = $48,000 ÷ 0.08 = $600,000. Reverse it to check: $600,000 × 0.08 = $48,000 NOI.