Negotiate

Buyers and Sellers of real property in the market negotiate, or reach an agreement, with regard to the terms of their sale including the purchase price.

To correctly establish a market value, an appraiser must confirm whether or not a transaction was a cash sale, a cash equivalent sale or if the terms were atypical.  Sellers can provide below market financing (Seller carry-back or a purchase money mortgage) that can skew the value of a property upward.   

 Net Operating Income (NOI)

The net operating income (NOI) of a real property is calculated by subtracting vacancy and collection loss and operating expenses from gross income.  This calculation provides before tax and depreciation information about a properties this is somewhat consistent and thus allows for comparison.  The net operating income of a property is usually capitalized using direct capitalization in the income approach analysis of an appraisal report.