Market Rent

The gross rental income that a property would most probably command in an open market. Existing rents do not necessarily equal market rents.

Market Value

Per the Appraisal Foundation: “The most probable price which a property should bring in a competi­tive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not af­fected by un­due stimulus. Implicit in this definition is the consumma­tion of a sale as of a speci­fied date and the passing of ti­tle from seller to buyer under conditions whereby:

• buyer and seller are typically motivated;
• both parties are well informed or well ad­vised, and acting in what they consider their best in­terests;
• a reasonable time is allowed for exposure in the open market;
• payment is made in terms of cash in United States dollars or in terms of financial ar­rangements comparable thereto; and
• the price represents the normal consideration for the property sold unaffected by spe­cial or crea­tive financ­ing or sales concessions granted by anyone associated with the sale.”

This definition focuses upon price and does not include such issues as: property taxes, mortgages, surveys, appraisals, buyer and seller financial situations, sales commissions, etc. Market value is not represented by one individual sale but instead it represents the central tendency of many similar sales taken together.

Mean

A measure of central tendency of a set of data. It is calculated by dividing the sum of the individual values of the data points within a data set by the total number of data points.

Median

In an odd numbered data set arrayed from low to high, it is the middle value. In an even numbered set, it is the midpoint between the two middle values.

Mode

The most frequently occurring value in a data set, which may or may not be equal to the mean or median.

Most Probable Price

The sale price that is most likely to occur or that is most typical. This price represents the central tendency of a data set of like or highly similar components, being not only the most likely mean and median but also the most likely mode of an assumed normal distribution. Another way of looking at this is: if the property in question were to sell a great many times, as of a specified date, most, or at least a plurality, of the sales would likely cluster at or near this price. However, as with any statistical distribution, some sales would also occur both above and below this amount.

Nominal Value

Little, minimal, or almost no value. A value very close to zero. Something for which there is no market, hence, no market value.

Normal Curve

The curve that results from the graphical portrayal of a statistical normal distribution. It is usually symmetrical and “bell shaped” in appearance with frequency (number of occurrences) shown on the vertical axis and the factor being sought, such as: price, size, etc. on the horizontal axis. 

Normal Distribution

A set of data consisting of things uniform in character except for one feature, such as price. Graphically represented by a normal curve.

Obsolescence

See depreciation.

Potential Gross Income

The gross rental income, before allowance for vacancies and all expenses that a property will generate over a given time period at typical market rents with 100% occupancy.

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