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Defining a Market: A Consideration for Real Estate Valuation
Whether it is an appraisal, an assessment or an investor’s analysis when finding value for a Property Tax Consulting, one must always consider and identify a market. To identify a market, one must conduct an in depth analysis and define the boundaries of the area of influence. Although physical boundaries may be marked, the most important boundaries are ones that specifically relate to the factors that influence the subject property (property being valued) the most.
The area of influence is commonly called a neighborhood (complimentary lands with the same use). A common example of a neighborhood would be one that contains single-family homes and commercial properties that provide goods and services to local residents. Neighborhoods differentiate from districts in that a district has one predominant land use. A district is commonly a collection of apartments, commercial, industrial or agricultural properties. Knowing this, the analysis of market area should be within which a subject property competes for the interests of buyers and sellers in the real estate market. Therefore, a market area can include one or more neighborhoods or districts.
When analyzing real estate, it is strongly recommended to use the term "market area" rather than neighborhood or district because of its greater effectiveness for the following reasons:
- Using the cover of the term "market area" avoids confusion and negative aspects of neighborhoods and districts
- Market area may encompass both neighborhood and district
- Refers to an area where market participants live and work and represents interests of buyers, sellers, investors, etc. better
To begin building the market area, the analysis must begin with the subjects’ location and begin to move outwards, identifying all relevant and actual influences that the property’s value should be attributed to (i.e. – proximity to major highways). The analysis should extend enough to capture all of the identified influences of the property’s value. When no more factors that would affect the property’s value are found then the market areas boundaries are found. At this point, data that is needed may be extracted from the established market area and the analysis can move forward for data collection.
Analyzing the market area establishes a structure, or context, to which opinions, questions and studies may be developed. The analysis of the market area will identify risk, factors of influence, potential limitations, and much more for which the analysis will need to use and apply the specifications to determine a valuation for that property or real estate. The market area will also help the analysis conclude and determine the stability and indication of upcoming land use and set value trends for the future.
Jonas Perov is an expert when it comes to Property Tax Consulting. To find out everything about property tax assessment, visit his website at

Jonas Perov is an expert when it comes to Property Tax Consulting. To find out everything about property tax assessment visit his website at
asked Jul 4 by PhilippKnagg (100 points)

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