Market Approach

AAA

DEFINITION of 'Market Approach'

A method of determining the appraisal value of an asset based on the selling price of similar items. The market approach is a business valuation method that can be used to calculate the value of property or as part of the valuation process for a closely held business. Additionally, the market approach can be used to determine the value of a business ownership interest, security or intangible asset. Regardless of what asset is being valued, the market approach studies recent sales of similar assets, making adjustments for differences in size, quantity or quality.

INVESTOPEDIA EXPLAINS 'Market Approach'

In the real estate industry, a property's value can be estimated by looking at the comparables: recently sold properties that are similar in size and features that are located within a close geographic proximity to the property being valued. Outlier transactions, indicative of particularly motivated buyers or sellers, may need to be compensated for since the price may not adequately reflect the fair market value.

RELATED TERMS
  1. Comparable Company Analysis - CCA

    A process used to evaluate the value of a company using the metrics ...
  2. Asset Valuation

    A method of assessing the worth of a company, real property, ...
  3. Extrinsic Value

    The difference between an option's market price and its intrinsic ...
  4. Valuation

    The process of determining the current worth of an asset or company. ...
  5. Intrinsic Value

    1. The actual value of a company or an asset based on an underlying ...
  6. USDA Non-Streamlined Refinancing

    A mortgage-refinancing option offered by the United States Department ...
Related Articles
  1. How Interest Rates Affect Property Values
    Personal Finance

    How Interest Rates Affect Property Values

  2. Don't Let Foreclosed Homes Ruin Your ...
    Home & Auto

    Don't Let Foreclosed Homes Ruin Your ...

  3. Do You Need A Home Inspection?
    Home & Auto

    Do You Need A Home Inspection?

  4. 4 Ways To Value A Real Estate Rental ...
    Home & Auto

    4 Ways To Value A Real Estate Rental ...

comments powered by Disqus
Hot Definitions
  1. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  2. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  3. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
Trading Center