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. Extrinsic Value

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

    The process of determining the current worth of an asset or company. ...
  4. Asset Valuation

    A method of assessing the worth of a company, real property, ...
  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 FAQS
  1. Who are the best-rated home insurance companies in the US?

    Based on consumer surveys, the best company for homeowners insurance in 2014 is Amica Mutual. Present and past insurance ... Read Full Answer >>
  2. How can I tell when a real estate agent might be lying to me?

    Real estate agents are likely to lie or fudge the details about their own credentials, the value and condition of a property ... Read Full Answer >>
Related Articles
  1. Personal Finance

    How Interest Rates Affect Property Values

    When interest rates fall, real estate prices tend to increase. Why? Find out here.
  2. Home & Auto

    Don't Let Foreclosed Homes Ruin Your Neighborhood

    Empty homes in your neighborhood aren't just eyesores - they can affect the value of your property.
  3. Home & Auto

    7 Ways To Increase Your Home's Appraisal Value

    When it's time to sell your home – or refinance it – it will need to be appraised. Here's how to make sure the valuation is as high as possible.
  4. Home & Auto

    Key Home Upgrades That Make Or Break The Deal

    When making a home purchase, pay attention to key features of the home that either should meet a certain standard or should be upgraded by the seller.
  5. Home & Auto

    Best Types of Remodels For A Smart Sale Strategy

    Consider these improvements to your home if you want to increase its resale price.
  6. Home & Auto

    Universal Design Improvements That Increase Your Home's Value

    Universal design improvements yield great returns for homeowners, either through increased future comfort, or broader market appeal for their home.
  7. Home & Auto

    8 Common Refinance Mistakes

    As mortgage rates creep higher, there's still time to dump your mortgage rate for a lower one. But don't ruin your chance at a refinance by making mistakes
  8. Home & Auto

    10 Questions You Forget to Ask When Buying a House

    If you are thinking about buying a home, you are not alone. According to the New York Times, more Americans are getting home-buying fever.
  9. Home & Auto

    How To Refinance If Your Home Appraisal Is Too Low

    When you take out a mortgage on a home or refinance an existing mortgage, most lenders want a loan-to-value ratio (LTV) of 80 percent or lower.
  10. Home & Auto

    The Pros And Cons Of Refinancing A Mortgage Loan

    Current refinance rates are at all-time lows; as such, refinancing a mortgage is more attractive than ever before.

You May Also Like

Hot Definitions
  1. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  2. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  3. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  4. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  5. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  6. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
Trading Center